RHB Research (RHB) is overall positive on YTL Power’s waste-to-energy (WTE) plant development as it is regarded as a more effective way to treat solid waste than using landfill.
They expect YTLP to deliver another strong set of results in 4QFY23F. Its venture into digital banking and green data centre businesses are long-term positives, despite minimal near-term earnings impact.
“Yesterday, YTLP confirmed that it is a codeveloper with KDEB Waste Management for a proposed 2400 tonnes/day WTE plant in Selangor, with a gross generating capacity of 58MW,” said RHB in the recent Malaysia Company Update Report.
The project is estimated at RM4.5bn. Firm timeline was not guided, but it was highlighted that an advisory outfit is involved to handle the environment impact assessment (EIA) and social impact assessment (SIA). The approval is targeted in the next 6-12 months.
“We are overall positive on such development as WTE is regarded as a more effective way to treat solid waste than using landfill. The project details have yet to be ironed out, including the capex and equity stake,” said RHB.
Assuming a return on investment of 8%, and the quoted estimated capital expenditure of RM4.5bn, this project could provide a gross annual return of RM360m.
“YTLP is announcing its 4QFY23 results this week. We expect stronger QoQ earnings from its 3QFY23’s RM530m core earnings. This is on the back of stronger performance by PowerSeraya, led by higher wholesale prices,” said RHB.
Downside risks identified by the research house are such as the weaker-than-expected plant performance, and higher-than-expected operating costs.
