Looking Beyond YTL Power's Short Term Profit Softness
RHB Investment Bank Bhd (RHB Research), MIDF Amanah Investment Bank Bhd (MIDF Research) and CIMB Investment Bank Bhd (CIMB Securities) have all maintained their BUY calls on YTL Power International Bhd following the group's third quarter results for financial year 2025, with target prices revised to RM4.18, RM4.51 and RM4.00 respectively. The optimism centres on growth in its data centre and UK water operations, despite near-term profit softness from its Singapore power unit, PowerSeraya.
RHB Research noted the group's core profit for 9MFY25 of RM2.1 billion, down 15% year-on-year, came in within expectations at 52% of RHB's full-year forecast. The house highlighted that the earnings decline, driven by a 31% drop in PowerSeraya's contribution, was partly offset by stronger performance from Wessex Water and reduced losses in its telco division. The target price was lowered from RM4.53 to RM4.18 to reflect dilution from unlisted warrants, with RHB applying a 2% ESG discount on YTL Power's intrinsic value.
MIDF Research similarly flagged weaker-than-expected results, citing a 3QFY25 core net profit of RM551.8 million and a 9MFY25 total of RM1.95 billion, representing 63.5% of its full-year estimate. The house pointed out that the power segment's softness stemmed from a decline in Singapore's pool and retail prices, worsened by currency effects from a stronger ringgit. However, Wessex Water's improved tariffs and contributions from Ranhill Utilities helped cushion overall earnings. MIDF Research expects the UK water operations to strengthen further from the next quarter, boosted by a 21% tariff hike.
CIMB Securities noted a 30% quarter-on-quarter drop in PowerSeraya's pre-tax profit to RM511 million due to rollover of contracts to lower tariffs and a fall in unit sales, compounded by a rising solar market share. The house estimates show Wessex Water's pre-tax profit surged 172% quarter-on-quarter to RM164 million on improved consumption and lower financing costs. CIMB Securities highlighted that YTL Power's total data centre capacity of 188MW is now fully contracted, with upcoming launches expected to drive earnings from late 1QFY26.
All three research houses pointed to the company's ongoing expansion in artificial intelligence data centres as a key growth lever. RHB Research reported that the first 20MW AI-powered facility is ready for commercial launch within two months, while MIDF Research and CIMB Securities said the 80MW centre initially earmarked for AI will now be used for co-location, already taken up by a third party. According to CIMB Securities, total contracted revenue for YTL Power's data centre business stands at US$2.5 billion.
Analysts agree the group's long-term prospects remain positive, anchored by diversification into high-margin infrastructure businesses. An interim dividend of 4.0 sen was declared. At RM3.60 per share, YTL Power trades at an undemanding valuation relative to future earnings potential, with projected yields between 1.8% and 2.5% in FY26. Related
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
New Straits Times
2 days ago
- New Straits Times
Banking sector seen trading sideways amid tariff incertainty: CIMB Securities
KUALA LUMPUR: The banking sector is likely to trade sideways in the near term as investors await greater clarity on tariff developments, said CIMB Securities Sdn Bhd. The firm has maintained its "Neutral" stance on the sector but kept its "Buy" calls on Alliance Bank Malaysia Bhd (ABMB), Public Bank Bhd (PBB), and RHB Bank Bhd, citing appealing dividend yields at current valuations. "Key upside risks include lower credit costs, stronger net interest margins, and potential bond gains from non-interest income. "Conversely, downside risks include a higher-than-expected cost of funds, liquidity outflows, and deterioration in asset quality," it said in a note. According to CIMB Securities, loan applications grew 10.1 per cent year-on-year (YoY) in April 2025, from 4.4 per cent YoY in March. Approved loans expanded 8.8 per cent YoY in April compared with 9.6 per cent YoY in March. "Leading loan indicators were driven mainly by the corporate segment, specifically the purchase of fixed assets (other than land and buildings), construction, and working capital segments. "There may be an element of front-loading in the numbers, as Malaysia's export growth accelerated markedly to 16.4 per cent YoY in April, driven by the 90-day pause in tariffs," it added. Meanwhile, CIMB Securities noted that loan growth slipped marginally to 5.1 per cent YoY in April, compared with 5.2 per cent YoY in March. This was supported by the auto, residential, and non-residential mortgage segments. Deposit growth rose to 3.8 per cent YoY in April from 3.0 per cent YoY in March owing to stronger current account and savings account (CASA) deposit growth of 4.5 per cent YoY in April. Business deposit growth was higher at 3.1 per cent in April after a flattish 0.7 per cent YoY rate in March but remains lower than the 6–9 per cent YoY growth recorded in 1H24. The loan-to-deposit ratio eased slightly to 87.4 per cent in April from 87.6 per cent in March. Furthermore, gross impaired loans increased 0.7 per cent or RM216.4 million, month-on-month (MoM) in April, mainly driven by the household segments. The gross impaired loans ratio was stable at 1.43 per cent in April compared to 1.42 per cent in March, while loan loss coverage remained high at 91.0 per cent in April from 91.2 per cent in March.
New Straits Times
2 days ago
- New Straits Times
TNB ordered to pay RM547k in late interest to landowner
PUTRAJAYA: Tenaga Nasional Bhd (TNB) has been ordered to pay RM547,105 in late payment interest to a company for delays in compensating it for land used in a transmission line project. A three-member Court of Appeal panel led by Federal Court judge Datuk Lee Swee Seng said the national utility giant must pay the sum to Lambang Kelana Sdn Bhd after finding that the company had been unfairly deprived of its money for over five years due to administrative delays. Other members of the bench were Court of Appeal judges Datuk Azimah Omar and Datuk Wong Kian Kheong. According to court documents, in 2007, TNB had prematurely entered Lambang Kelana's land without due compliance with wayleave procedures under Section 11 of the Electricity Supply Act to install electrical infrastructure. The section stipulates that utility companies must follow specific procedures before entering private land to install or build electrical infrastructure, including giving formal notice to landowners and paying full compensation for any disturbance or loss of use of the land. Lambang Kelana was neither served the statutory notice nor paid proper compensation for the loss of the portion of land acquired as wayleave for TNB. The dispute led to a protracted legal battle, and TNB only paid RM2.1 million in compensation in 2020. However, the payment did not include any interest for the long delay. In 2021, the Negri Sembilan State Authority decided that Lambang Kelana should receive RM1,369,332.95 in late payment interest for the delay in compensation from October 2015 to December 2020. However, TNB filed a judicial review to challenge the decision in the High Court and succeeded in getting it overturned. Azimah, who delivered the unanimous decision in dismissing the lower court's ruling, said the trial judge had misinterpreted the law by adopting a narrow and literal reading of the relevant provisions. "To deprive the appellant of its rightful late payment charges would certainly transgress upon the appellant's constitutional rights safeguarded under Article 13(2) of the Federal Constitution. "Despite the delay caused by the Land Administrator, TNB was still unjustly enriched by being able to utilise and earn interest on the monies that were supposed to be paid to Lambang Kelana for the entire duration of the delay," she said. The appellate court said any interpretation of the law that allows government authorities or licensees to delay compensation with impunity would be unjust. "We are certain that no statute ever legislated within our nation would promote a statutory authority to delay justice with impunity at the expense of unjust losses incurred against innocent landowners. "If that be the case, then TNB would stand to unjustly benefit by holding onto monies that should have been paid to landowners, courtesy of delays by the Land Administrator. "In the meantime, the Land Administrator would not suffer a single sen for the entire duration of the delay. The only party to suffer losses would be the landowner. "Such an interpretation would truly be absurd and unjust," the court added. The court also did not make any order for costs. Lambang Kelana was represented by lawyers Yeoh Cho Kheong and T. Subbbiah, while lawyer David Dinesh Mathew appeared for TNB.
BusinessToday
2 days ago
- BusinessToday
Malaysia's PMI Remains Contracted Amid Weak Demand And Tariff Concerns
Malaysia's Manufacturing Purchasing Managers' Index (PMI) saw a marginal increase to 48.8 in May, up from 48.6 in April, according to the latest data. However, the index remained below the neutral 50.0 mark for the twelfth consecutive month since June 2024, signaling a continued, albeit mild, deterioration in manufacturing conditions midway through the second quarter of 2025. Despite the prolonged contraction, economists anticipate that Malaysia's Manufacturing GDP growth in 2Q25 is likely to remain relatively stable, mirroring the performance of the previous quarters (1Q25: 4.1%; 4Q24: 4.2%). Weak Demand Persists, Weighing on Key Indicators: The latest PMI reading highlights the persistent challenge of weak demand. Total new orders continued their downward trend for the third straight month, although the pace of decline has eased. Notably, new export orders also contracted for the sixth consecutive month, indicating sluggish external demand. Finished goods inventories continued to decline, suggesting manufacturers are adjusting to lower order volumes. While the rate of inventory reduction has slowed, overall stock levels remain lower. Rising Input Costs Amid Stable Output Prices: Manufacturers faced increased pressure from rising input costs in May. Input prices saw their most significant jump since November 2024, primarily attributed to unfavorable exchange rates and the impact of new tariffs, which have increased the cost of imported raw materials. Interestingly, despite the higher input costs, output charges remained unchanged in May, ending a four-month period of price declines. This suggests that manufacturers are absorbing some of the cost increases rather than passing them on to consumers. Business Optimism Dips Amid Global Uncertainties: Business sentiment within the manufacturing sector has taken a hit, falling to its lowest level since June 2021. While firms expressed relative optimism for better demand conditions in the coming year, the prevailing concerns surrounding US trade tensions and ongoing labor shortages have dampened overall confidence. Employment levels remained steady in May, halting a seven-month streak of job cuts. Companies continued to work through outstanding orders, with backlogs declining slightly. Outlook: Domestic Demand to Provide Cushion Amid Tariff Uncertainty: MIDF Research has revised its 2025 GDP growth forecast for Malaysia downwards to 4.3% (from 4.8%), following a weaker-than-expected performance in 1Q25 (4.4%). The downgrade also factors in anticipated headwinds in the second half of the year stemming from global trade uncertainty linked to potential US tariffs. While the possibility of a favorable Malaysia-US trade deal exists, a return to pre-2024 tariff levels is deemed unlikely. Despite these external challenges, MIDF believes that Malaysia could still benefit from trade and investment diversion resulting from the ongoing US-China decoupling, leveraging its strategic location and diversified export portfolio. Domestically, the services and construction sectors are expected to be key drivers of growth, providing a buffer against external pressures Related
