YTL Power Overview and Key Investment Highlights

YTL Power Berhad (YTLP MK) stands as a diversified utilities company with a portfolio of operational and developmental concessions across six countries. The company has demonstrated resilience and adaptability across various sectors, including utilities, data centers, and artificial intelligence (AI) computing. Maybank Investment Bank reiterates a BUY recommendation for YTL Power with a target price of MYR 4.70, representing an 18% upside from its last traded price of MYR 4.05.

Proposed Bonus Issue of Warrants

YTL Power has proposed a 1-for-5 bonus issue of warrants, offering shareholders flexibility in their incremental capital commitments. Each warrant has a tenure of three years and can be exercised at a discounted price of MYR 2.45, a 40% discount to the last closing price. While these warrants are non-transferable and unlisted, they present an opportunity to raise up to MYR 4.1 billion, primarily earmarked for new projects such as data centers and AI business ventures.

Alignment with Parent Company YTL Corp

YTL Corp, the parent company of YTL Power, has also proposed a similar issuance of warrants at an exercise price of MYR 1.50, a 37% discount to its last closing price. If fully exercised, YTL Corp aims to raise MYR 3.4 billion, with MYR 2.2 billion allocated towards exercising the YTL Power warrants it holds. The Yeoh family, major stakeholders in both entities, would need to invest approximately MYR 2.1 billion to fully exercise their respective warrants.

Financial Performance and Target Price Analysis

YTL Power’s financial performance has been robust, with revenue projected at MYR 21.99 billion for FY25. EBITDA margins stand strong at 28.1%, and the company has demonstrated a consistent free cash flow yield of over 5%. The target price of MYR 4.70 is derived from a sum-of-parts valuation, with data centers and AI compute contributing MYR 0.46 per share to the valuation.

Key Business Segments

• Power Seraya: Contributing 48% to the equity value, this segment is valued at MYR 18.4 billion.
• Wessex Water: Accounting for 31% of the equity value, Wessex is valued at MYR 11.96 billion.
• Data Centers: Representing 10% of the equity value, this segment is valued at MYR 5.44 billion, with a focus on solar-powered developments.
• Jawa Power: Valued at MYR 5.09 billion, contributing 3% to equity value through its 20% stake in a coal-fired power plant in Indonesia.
• Attarat Power: This greenfield shale oil-fired power plant in Jordan contributes 10% to equity value.

Environmental, Social, and Governance (ESG) Analysis

Environmental Concerns

YTL Power has substantial exposure to coal through its 20% stake in Jawa Power. Despite this, the company is actively pursuing renewable energy initiatives, such as waste-to-energy projects in Wessex and solar-powered data centers in Johor.

Governance Metrics

YTL Power’s board comprises 12 directors, with only 33% classified as independent, slightly below the recommended majority. Additionally, 25% of the board members are women, but no specific targets have been set for female representation.

Social Impact

YTL Power has been proactive in community contributions, particularly through its telecom arm in Malaysia, which facilitated education-related CSR initiatives during the COVID-19 pandemic.

ESG Score

The company scores 58/100 in Maybank’s proprietary ESG assessment, reflecting an above-average rating. YTL Power has set ambitious targets, including achieving net-zero operational carbon emissions for Wessex Water by 2030 and carbon neutrality across the YTL group by 2050.

Risk Factors

Key risks include regulatory changes, plant outages, and currency fluctuations due to the company’s international footprint. Additionally, its coal and shale oil investments could deter ESG-conscious investors.

Future Outlook

With its strategic investments in AI computing, renewable energy, and data centers, YTL Power is well-positioned for growth. The proposed bonus warrants provide a mechanism to fund these ventures, ensuring long-term shareholder value.