Exposure through YTLP
The SEA-YTL consortium was expectedly awarded the digital bank
license, having been among the frontrunners during the bidding process
in our view. The announcement confirms that the YTL group’s exposure
to the digital bank would be via YTLP. Reiterate BUY with an unchanged
MYR0.90 TP (SOP-based). We believe YTLP can comfortably sustain a
5sen annual DPS in the coming years.
Digital bank license in the bag
The consortium between SEA Ltd (SE US, BUY, CP: USD87.59, TP: USD160,
parent company of Shopee) and YTL Digital Capital (100% subsidiary of
YTL Power) has been awarded a digital bank license from Bank Negara.
Initial capital requirement for the digital bank is MYR100m, rising to
MYR300m after 3 years. Bank Negara expects these new digital banks to
begin operations in mid-2023.
Awaiting more clarity
Given previous uncertainty, the announcement confirms that the YTL
group’s exposure to the digital bank would be via YTLP. The shareholding
split of the consortium remains unknown at the time of writing, with
press reports alluding to YTLP having majority control. Given SEA’s digital
expertise (including digital banking in Singapore), we would expect YTLP
to play a support role in the digital bank operations.
Earnings immaterial initially
We believe the digital bank is unlikely to contribute materially to YTLP’s
earnings in the initial years. Our earnings forecasts and MYR0.90 TP
(based on a sum-of-parts, with the operating entities each valued by
DCF) are unchanged. The digital bank license further solidifies the
relationship between SEA and the YTL group (YTL Comm already runs a
reward program with Shopee). We do not rule out more of such
collaborations in future.