More exciting developments in the pipeline
? The disposal proceeds from ElectraNet could be used for new ventures, i.e.
data centres & green solutions, digital banking or other acquisitions.
? Earnings at Singapore’s unit should normalise in remaining quarters on
sufficient supply of fuel and better margins. FY22-24F DPS decent at c.5 sen.
Monetisation of ElectraNet completed
YTL Power International (YTLP) completed the disposal of its 33.5% equity interest in
ElectraNet to Australian Utilities Trust (AUT) for a total sale consideration of A$1.03bn
(c.RM3.06bn) at end-Mar 2022, with an estimated disposal gain of RM2.2bn, which will
provide buffer for its future business ventures. The disposal price tag translates into 1.6x
of ElectraNet’s regulated and contracted asset base (RCAB).
Bigger war chest for new business avenues
The majority of the disposal proceeds will be utilised for future investments, which the
company has yet to disclose. We believe proceeds could go into: (i) green data centre
and green energy solutions (up to 500MW) at Kulai Young Estate in Johor, with an
estimated capex of RM8bn-9bn, (ii) digital banking business, if a digital banking licence is
granted, and (iii) other lucrative acquisitions.
Multi-utilities likely to post stronger earnings
Management expects its multi-utilities business in Singapore to normalise in the
remaining quarters as the decline in the division’s 2QFY6/22 pretax profit was due to a
shortage of gas supply from Indonesia. We see better performance from the division
given the gradual reopening of the economy, higher electricity pool prices and the recent
exit of some electricity retailers in Singapore. The carbon tax hike in phases announced
in the city state’s 2022 budget (S$5/tCO2e for 2019-2023, S$25/tCO2e for 2024-2025,
S$45/tCO2e for 2026-2027 and S$50-80/tCO2e by 2030) should have a limited impact
on its Singapore unit as the additional costs could be passed through to end users.
Sustainable FY22-24F DPS
YTLP has been paying out dividend per share (cash or share dividends) of 4.5-5 sen,
with a dividend yield of 5-7% over FY18-21, which is on the higher end vs. its peers. With
the cash pile from ElectraNet’s disposal and improving earnings profile, we expect the
dividend per share to be sustained at a similar level of 4-5 sen for FY22-24F.
Reiterate Add
We adjust our FY22-24F EPS estimates by +7%/-5% to reflect the disposal of ElectraNet,
higher interest income and Attarat’s contribution. Our SOP-based TP is raised to RM1.06
as we: (i) reflect the cash proceeds from the recent disposal of ElectraNet, (ii) remove
ElectraNet’s valuation following the completion of the disposal, and (iii) factor in our
valuation for Attarat, which is slated to commence operation in CY22F. Retain Add given
the anticipated stronger FY22-24F earnings and decent dividend yields.