YTL Power International Berhad - Power Seraya Continues to Lift Bottomline

Date: 
2023-11-24
Firm: 
TA
Stock: 
Price Target: 
2.60
Price Call: 
BUY
Last Price: 
3.91
Upside/Downside: 
-1.31 (33.50%)

Review

  • YTL Power International Berhad (YTLPOWR) continues to report a stellar performance in 1QFY24. 1QFY24 core profit of RM906.1mn (increased more than sixfold YoY) came in within ours but beat consensus expectations, accounting for 31% of our full-year forecast and 40% of consensus estimates. We deem the result to be within expectations as we expect lower contribution from Power Seraya in 2HFY24 as guided by management which we believe is due to the expiration of retail electricity sales contract with higher tariffs.
  • YoY: 1QFY24 revenue increased 14.8% YoY driven by growth in all 4 segments. Notably, Investment Holdings segment’s revenue more than doubled due to higher shareholder loan interest income from Attarat Power. Consequently, PBT more than quadrupled on the back of greater interest income from Investment Holdings segment and better margins from Power Seraya which we believe is due to higher tariffs from retail sales contracts.
  • QoQ: 1QFY24 revenue plunged 23.2% QoQ mainly due to lower contribution form Power Seraya (-27.6% QoQ) while PBT dropped 23.7% QoQ primarily driven by adjustments on accrued technical service income and shareholder loan interest income following commercial operation of Attarat Power. Wessex Water and Telecommunications segments’ LBT widened due to higher interest accruals on index-linked bond and 23.7% QoQ drop in revenue respectively.

Impact

  • We update our annual report numbers and tweak our FY24-FY26 earnings forecasts by -0.5%.

Outlook

  • Power Generation: We expect weaker performance in 2HFY24 due to the expiration of retail electricity sales contract with higher tariffs. However, with the National Energy Transition Roadmap and finalisation of mechanism of renewable energy exchange hub, this should benefit YTLPOWR via export of renewable energy to Singapore.
  • Water and Sewerage: The group has submitted its business plan for 2025-2030 to Ofwat in October 2023. Wessex Water is expected to register narrower losses in the coming quarter as energy cost trends downwards.
  • Telecommunications: With the extension of 5G services in tandem with DNB’s nationwide rollout, the segment could gain more subscriber base in the coming quarters. Nonetheless, we believe the segment is unlikely to turn to PBT yet in the near term.
  • Investment Holdings: We are upbeat on YTLPOWR’s 500MW Green Data Centre project. Of note, its 48MW IT Load Hyperscale Data Centre already has Sea Limited as its anchor (taking up 32MW) and is currently under phase 1 of development (8MW). The Data centre is expected to be ready for service by 1QCY24. We believe YTLPOWR’s Green Data will continue to attract foreign interests as the world moves towards net zero emission.

Valuation

  • We roll forward our base year for DCF valuation to FY24 and raise our TP for YTLPOWR to RM2.60/share (previous: RM2.40/share) based on SOP valuation. Maintain Buy recommendation.

Source: TA Research - 24 Nov 2023

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