YTL powers on with solid earnings profile from oversea assets

KUCHING: YTL Power International Bhd’s ( YTL Power) strong earnings profile are anchored by elevated electricity pool prices in Singapore and higher water tariffs in the UK that bode well with the performance of its overseas assets in the two countries.

In a company update report, the research team of RHB Investment Bank Bhd ( RHB Bank) shared that they had returned from a recent analyst briefing with YTL Power feeling optimistic on the group’s solid earnings profile, especially from its Singaporean asset YTL PowerSeraya Pte Ltd ( PowerSeraya).

PowerSeraya’s earnings outlook remains bright with the elevated Uniform Singapore Energy Price ( USEP) and locked- in competitive gas contracts. The USEP has average at SGD259 per MegaWatt Hours ( MWh) between Jan and Mar this year, which is significantly higher than the SGD85 per MWh 5- year average that was seen during 2016 to 2020.

“Hence, the earnings

Hence, the earnings contributions are set to remain solid in the near term. Given that most electricity contracts are locked in for two years, we think YTL Power is able to continue locking in attractive rates post expiry of the 2- year contracts.

RHB Bank

contributions are set to remain solid in the near term. Given that most electricity contracts are locked in for two years, we think YTL Power is able to continue locking in attractive rates post expiry of the 2- year contracts,” said the analyst.

The analyst also noted the group’s UK Wessex Water Services Ltd ( Wessex Water) is well protected in the current high inflation environment and it is expected that the UK’s higher inflation will provide future growth for its regulated asset base and revenue.

“Recent operating results were affected by accounting anomalies and additional finance costs from indexlinked bonds that have no cash impacts. Going forward, Wessex Water’s numbers are likely to improve, as tariffs have been lifted by 9 per cent on average effective April,” RHB Bank guided.

Additionally, the group’s 45 per cent owned Jordan plant commissioning is also now complete and with a project interest return rate of 13 to 15 per cent, the plant’s maiden contributions will be a welcome revenue stream for YTL Power.

RHB Bank reiterates its ‘ Buy’ call on YTL Power with an increased target price of RM1.25 from RM1.00 which represents a 19 per cent upside to the group’s closing share price of RM1.05 on Apr 17.