YTL Power International: Making A Go For Ranhill At RM0.995

YTL Power International Bhd (YTLPOWR) which is in the midst of raising its stake in RANHILL to 53.2%, is making a general offer (GO) for shares it  has not already owned in the utilities company at RM0.995/share.

Kenanga Investment Bank (Kenanga) today (May 29) said they see RANHILL’s water utility in Johor, IPP in Sabah, and large scale solar project in Perak as good fits to YTLPOWR, although their impact to earnings is minimal.

Kenanga maintains their forecasts, with a target price (TP) of RM5.22 and a MARKET PERFORM rating on YTLPOWR.

YTLPOWR, through its 70%-owned SIPP Power Sdn Bhd is acquiring a  31.42% stake in RANHILL from the latter’s major shareholder Tan Sri  Hamdan and his related parties for RM405.2m cash. Upon completion of the acquisition (targeted by June 2024), SIPP Power will own about 53.19% stake in RANHILL from 21.77% currently, which will trigger  an unconditional mandatory take-over (MTO) offer to acquire all the remaining share in RANHILL not already owned by SIPP Power at  RM0.995/share. YTLPOWR intends to maintain the listing status of RANHILL post the exercise.

Assuming full acceptance by minority shareholders, at a total outlay of RM1.01b (including RM405.2m for a 31.42% from Tan  Sri Hamdam and his related parties) will only reduce YTLPOWR’s cash position of RM8.76b as at end-Mar 2024 to RM7.75b.

Kenanga expects minimal earnings impact on YTLPOWR given the relatively small earnings base of RANHILL. Based on consensus for FY24- FY25F net profit estimates of RM49.6m and RM55.2m, respectively, for  RANHILL, earning impact to YTLPOWR is only 0.9% in FY24F.  Nonetheless, strategically, RANHILL’s water utility in Johor, IPP in  Sabah (100MW) and large-scale solar project in Bidor, Perak (50MW)  are good fits to YTLPOWR.

Kenanga continues to like YTLPOWR for: (i) its earnings stability backed by various regulated assets globally, (ii) the strong  near-term earnings prospects of PowerSeraya backed by gas inventory  locked in at low prices, and (iii) its longer-term growth potential driven  by its data centre and digital banking ventures.

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