KUALA LUMPUR: YTL Power International Bhd's earning forecast is anticipated to stay positive, and dividends could surprise to the upside, given the robust earnings of its subsidiary, PowerSeraya.
According to Hong Leong Investment Bank Bhd (HLIB), the management had earlier predicted that the retail sector will account for 75–80 per cent of PowerSeraya's revenue, with the SP group accounting for an additional 10-15 per cent (fixed margins).
Therefore, HLIB anticipates that PowerSeraya will continue to support YTL Power's profit and cash flow in the upcoming years due to the stable retail power pricing, which differs from the Uniform Singapore Energy Price (USEP).
"The earnings will be further strengthened with the commencement of the 100 megawatts (MW) import (from Malaysia) and the commissioning of the hydrogen-readied combined cycle gas turbine plant (CCGT) by 2028," it said.
While YTL Power does not have direct peers, HLIB is still able to relate its earnings to Keppel Corp, Sembcorp Industry, and First Pacific with regards to the Singapore utilities sector.
Bloomberg consensus has been estimating increasing earnings for Keppel, Sembcorp, and First Pacific for FY12/24–26, contrary to YTL Power's consensus estimating a deteriorating earnings profile for FY06/24–26.
"We believe the contradicting estimates are mainly due to the consensus's lack of understanding of Singapore's utility structure and, consequently, the earnings sustainability of YTL Power.
"We expect further upside as investors come to appreciate the value of its data centre, the earnings recovery of Wessex Water, and the sustainability of PowerSeraya," it said.
HLIB maintained buy on YTL Power with an unchanged target price of RM5.55.
