What's Next After KLCI Inclusive & Jenson Huang Visit?

After rising for 190% in 2023 so far, YTL uptrend doesn't seem to be stopping. After the hype of KLCI inclusion and NVIDIA's CEO visit, is YTL cheap or expensive? Everyone knows about technical and drawing lines, so I will only talk about its fundamental in this article.

First of all, YTL has 4 major business segment namely: i) Utilities; ii) Cement & building materials; iii) Hotel operations; and iv) Construction. The remaining are smaller contributions from property.

i) Utilities : the highest contributing segment (70% of revenue), exposure through YTLPower (55.6% owned)

YTL Power International Berhad (YTLP) has shown significant growth in recent quarters, mainly due to PowerSeraya's strong performance in Singapore's tight supply-demand energy market. The acquisition of Tuaspring in June 2022 has further boosted the group's performance. The addition of APCO in FY24 is expected to sustain Utilities segment earnings for the next 3-4 years.

YTLP is also focusing on new growth initiatives, including developing a 500MW green data center (YTLDC), a 500MW Large Scale Solar (LSS) project to support YTLDC, and a collaboration with KDEB to co-develop up to 122.5MW of waste-to-energy (WTE) capacity. These strategies indicate YTLP's commitment to sustainable growth and market diversification.

Its cement segment is set for sustained growth in future quarters, supported by strong pricing power and lower fuel costs. The segment has seen increasing profit margins for three consecutive quarters since 1QFY23, aided by effective cost pass-through strategies, especially for coal. Bulk cement prices have risen from RM370 to RM410 per ton, while coal costs, a major production expense, have dropped significantly.

YTL Corporation's current RM2.5 billion orderbook has significant potential for expansion due to several key projects. (MRT3 awards (specifically CMC302, valued at RM11 billion), A 500MW green data center project estimated at RM15 billion, A Waste-to-Energy (WTE) plant worth RM4.5 billion.

The positives of YTL do not just come from one segment but an overall improvement. Based on my estimates: YTL fair value can be as high as RM 2.5 excluding the potential collaboration with NVIDIA.