RHB Investment Bank has maintained its BUY call on YTL Power International Bhd (YTL Power) while raising its target price to RM6.35 from RM6.00, implying a 44% upside, after incorporating the value of its Brabazon township development in Bristol, UK, into its sum-of-the-parts (SOP) valuation.
The revised target price also implies an estimated dividend yield of about 2% for FY2027.
RHB raised its target price by 6% following a recent visit to YTL Power’s 450-acre Brabazon township development in Bristol and Wessex Water’s treatment facilities in Bath.
The research house attributed the increase primarily to the inclusion of Brabazon’s estimated value of 36 sen per share in its valuation, although it maintained its earnings forecasts for the group.
Brabazon Project Seen As Key Long-Term Value Driver
RHB said Brabazon is one of 12 plans endorsed by the UK Government for the development of new townships.
Acquired by YTL Power in 2015, the 450-acre site is historically significant as the birthplace of the UK aviation industry and includes the Brabazon Hangars and Filton Airfield, which was associated with the supersonic Concorde commercial aircraft.
YTL Power plans to develop the township over the next 15 to 20 years, with an estimated gross development value (GDV) of GBP6 billion to GBP7 billion.
The first phase has already seen 500 homes completed and delivered, while another 239 residential units have been earmarked for development in the next phase.
Over the longer term, the township has capacity for up to 25,000 homes, alongside 60 acres of commercial space, a public park and a new train station.
RHB said it has adopted a conservative assumption of GBP6 billion GDV over a 20-year development period and a GBP/MYR exchange rate of 5.50, resulting in an estimated Brabazon valuation of approximately RM33 billion.
The research house then ascribed 10% of the GDV as its valuation for the project, translating into an estimated 36 sen per share.
This represents around 6% of RHB’s new SOP-based valuation for YTL Power.
RHB said the discount reflects the project’s long development timeline, execution risks and exposure to the UK residential property market, particularly as properties at Brabazon are sold only upon completion rather than through progress billings commonly used in Malaysia.
Wessex Water To Remain Major Earnings Contributor
Meanwhile, RHB’s visit to Wessex Water highlighted the water utility’s importance to YTL Power’s earnings outlook.
Acquired by YTL Power in 2002, Wessex Water is one of 11 regional water and sewerage businesses operating across England and Wales. It serves approximately 2.9 million people across South West England.
Wessex Water has committed to investing GBP3.5 billion between 2025 and 2030 to improve its water infrastructure and assets.
RHB has incorporated a 21% tariff increase into its forecasts and expects Wessex Water to contribute approximately 37% of YTL Power’s group profit before tax in FY2027-28.
The research house expects the water business to provide a relatively stable earnings contribution, complementing the group’s growing data centre operations.
Data Centres Support Valuation
RHB made no changes to its earnings estimates but raised its SOP-based target price by 6% after incorporating Brabazon’s value.
The target price also factors in a 2% environmental, social and governance (ESG) discount.
At RM6.35, the target price implies about 17 times FY2028 forecast price-to-earnings (P/E), or around one standard deviation above its historical mean.
RHB considers the valuation fair given the expected increase in contributions from YTL Power’s data centre segment, alongside stable earnings from its water supply business.
YTL Power is scheduled to release its fourth-quarter FY2026 results on Aug 20.
Key Risks
RHB identified higher fuel costs for PowerSeraya and delays in data centre commissioning as the key downside risks to its outlook.
Despite these risks, the research house retained its BUY recommendation, supported by the potential value embedded in Brabazon, the stable contribution from Wessex Water and the group’s growing exposure to data centres.
