HLIB positive on YTL Power’s digital banking foray

by S BIRRUNTHA / pic source: ytlps.com

HONG Leong Investment Bank Bhd (HLIB) believes YTL Power International Bhd (YTLP) has the financial resources to help fund the rollout of its wholly owned subsidiary, YTL Digital Capital Sdn Bhd, digital banking services.

YTL Digital-SEA Ltd consortium was one of five successful applicants for Malaysia’s maiden digital banking licences.

HLIB analyst Daniel Wong stated that YTLP will be able to leverage onto SEA Ltd’s capability and regional network, and concurrently extract synergistic benefits with YTL Communications Sdn Bhd. 

“SEA’s Shopee platform is one of the largest e-commerce players with e-wallet services in Malaysia, as well as within regional Asean. 

“SEA has also received a digital banking licence in Singapore and Indonesia,” he wrote in a report yesterday. 

The initial capital investment for Malaysia’s new digital banking licence is around RM100 million (unimpaired by losses) during the “foundational phase” of three to five years and by the end of five years, the consortium needs to achieve a minimum amount of capital funds of RM300 million (unimpaired by losses).

Wong noted that YTLP can easily fund the capital requirement (for its shareholding portion) with the recently completed RM3 billion cash proceeds from the disposal of ElectraNet Pte Ltd.

HLIB has upheld its ‘Buy’ recommendation on YTLP, with an unchanged target price of RM1.05, based on 10% discount to sum of parts of RM1.16.

The investment bank added that the current valuation is relatively undemanding and YTLP’s dividend yield may surprise on the upside.

YTLP is an investment holding company, with investments in power generation, power transmission, power retailing, water and sewage treatment and telecommunication services.

YTLP last traded at 74.5 sen a share, valuing the group at RM6.08 billion.