Achieving yet another new record high

HLIB Research, August 25, 2023

YTLP reported a new quarter record high core PATMI of RM1.0bn for 4QFY23 (+109.3% QoQ, +325.5% YoY), bringing FY23 to RM2.0bn (+472.3% YoY), mainly attributed to the strong performance of Singapore PowerSeraya. The results were above HLIB FY23 forecast (151.2%) and consensus (153.3%). Raised earnings for FY24 by +31.2% and FY25 by +80.2%, as we are now more confident on PowerSeraya’s earnings and new contribution from Attarat Power. Maintain BUY with a higher TP: RM2.90 (from RM2.05) based on 10% discount to FD SOP: RM3.23.

Above expectations. Core PATMI surged to RM1.0bn in 4QFY23 (+109.3% QoQ; +325.5% YoY), boosting FY23 to RM2.0bn (+472.3% YoY). The results were above HLIB FY23 expectation (151.2%) and consensus (153.3%), mainly driven by higher contributions of Singapore PowerSeraya, new contribution from Jordan Attarat Power and higher investment income. In FY23, there were EIs of RM68.0m, mainly due to unrealised RM126.7m forex gain, partially offset by net -RM58.6m impairments/provisions/fair value loss on investments/disposals.

Dividend. Declared a second interim dividend of 3.5 sen/share (ex-date: 9 Nov 2023). Total dividend for FY23 was 6.0 sen/share, yielding 3.4%.

QoQ; YoY & YTD. Core PATMI improved by +109.3% QoQ and +325.5% YoY to RM1.0bn in 4QFY23 and +472.3% YTD to RM2.0bn in FY23, mainly driven by stronger contribution from Singapore PowerSeraya (on improved pool and retail prices, resulting to higher margin), higher investment income (due to rate hike) and new contribution from 45% owned Jordan Attarat Power with lower losses from Yes Communications (on higher project contribution in relation to sub-station contracts for DNB), which was partially offset by higher losses from UK Wessex Water on inflationary cost pressure (including index-link interest costs).

Outlook. Singapore PowerSeraya continued to deliver exceptionally strong earnings YTD, leveraging onto the new asset, higher pool prices, higher retail prices and locked-in low gas prices to expand its market share and improve its overall margins. Management guided earnings to remain strong in FY24, despite the drop in USEP in July, as PowerSeraya’s exposure towards USEP is slightly below 10% of the subsidiary revenue, while majority of the earnings is driven by the healthy margins from the retail market segment. YTLP is actively exploring opportunities in RE/EV following Malaysia NETR policy to encourage RE investments, digitalization, export of RE, etc. The group is exploring more lands for the development of LSS as well as WTE. YTLP will also benefit from the recent full commissioning of Jordan Attarat Power (effective Jun) through maintenance income, shareholder interest income and share of associate earnings. However, UK Wessex Water remains disappointing despite the tariff revision of +9% effective April 2023. Management expects minimal contribution from Wessex in FY24 due to high energy cost base. Yes will continue to improve with 5G service offerings and also ongoing projects contribution. Data centre of 48MW (32MW undertaken by SEA Limited) is guided to provide RM100m PBT when fully commissioned (in stages over 4 years).

Forecast. We have adjusted earnings for FY24 and FY25 by +31.2% and +80.2% respectively to account for higher revenue and improved margins.

Maintain BUY, TP: RM2.90. We uphold our BUY recommendation, with a higher TP of RM2.90 (from RM2.05), based on 10% discount to FD-SOP (RM3.23), as we believe the current valuation is relatively undemanding, given the strong earnings recovery of Singapore PowerSeraya while dividend may surprise on the upside.