PETALING JAYA: YTL Power International Bhd
appears to be gearing up to further its renewable energy (RE) ambitions, says MIDF Research.
Following a report that the YTL group could be one of the parties that have put in a bid for Boustead Holdings Bhd’s 57% stake in Boustead Plantations Bhd (BPlant), the research firm said YTL’s interest could stem from its RE ambitions, which requires sizeable land bank to house potential RE assets, as well as data centres.
The other bidders are said to comprise mainly plantation players, namely IOI Corp Bhd, Kuala Lumpur Kepong Bhd and Singapore-listed Wilmar International Ltd.
According to the news report, the closing of expression of interest was last week and a decision is expected in about a month.
MIDF Research noted that YTL Power had acquired BPlant’s Kulai Young Estate in early-2022 involving 664 ha of land bank for RM429mil.
It said bite-sized acquisitions inevitably cost a premium with the Kulai Young Estate land acquisition translating into a hefty RM646,084 per ha.
According to the research firm, the lock stock and barrel acquisition of BPlant is expected to give its potential buyer comparatively cheaper access to some 97,400 ha of land bank spread across Peninsular Malaysia, Sabah and Sarawak.
“At the current enterprise value (EV) of an estimated RM2.73bil (net debt as at March 2023: RM732mil), BPlant’s land bank is valued at an estimated EV per ha of RM27,988,” it added.
Hypothetically, with YTL Power’s gross cash of RM8.9bil, this is more than sufficient to finance BPlant’s equity value of RM1.99bil, based on current market price, which implies about 0.7 times price-to-book value, said MIDF Research.
Meanwhile, YTL Power’s two-year 100-megawatt trial power import into Singapore is expected to end in 2025.
MIDF Research believes that the group would be preparing for major investments into RE capacity to follow up once the trial is over.
“Singapore aims to import up to four gigawatt of clean electricity by 2035, which is expected to make up around 30% of electricity supply then.
“Supporting the export prospect is the government’s recent announcement to lift RE export and to develop an electricity exchange system to enable cross-border RE trading.”
The research firm reaffirms its “buy” call on the stock and maintains the RM1.54 target price for now.
It noted that the valuation of the stock is undemanding at 8.5 times financial year 2024 forecast price-to-earnings ratio.
This is about a 30% discount to the 10-year historical mean of 13 times. The group’s dividend yields are also attractive at 4.2% and 5.9%.
Additionally, the research house said YTL Power is well-positioned to benefit from the lifting of the RE export ban, given its advantage in having existing generation and retail operations in Singapore.
In the near term, earnings are set to be boosted further by the Wessex Water tariff hike in the United Kingdom and Singapore’s PowerSeraya due to a tight electricity market in that country.
