YTL Power delivered another strong set of results backed by the power generation division which masked Wessex Water’s contribution. Its venture into digital banking and green data centre businesses, in RHB Research (RHB)’s view, are long-term positives despite near-term earnings impact being minimal.
The nine months financial year 2023 core profit of RM964 million significantly surpassed expectations at 123% and 113% of RHB and Street estimates, mainly led by the stronger-than-expected contribution from the power generation division.
“First interim dividend per share of 2.5 sen was declared,” said RHB in the recent Malaysia Results Review.
Quarter three financial year 2023 core profit surged 7.0x year-on-year to RM530 million on stronger power generation from higher retail prices masking the weaker Wessex Water contribution and widened losses in the telco division.
Wessex Water recorded loss before tax of RM47 million no thanks to interest accruals on index-linked bonds which is a non-cash impact. As such, nine months financial year 2023 core earnings also strengthened by 5.9x to RM964 million. The power division is expected to deliver solid earnings ahead, on strong wholesale prices in the near term.
The Uniform Singapore Energy Price (USEP) has averaged at SGD276 megawatt per hour between Jan-Apr 2023. Despite being lower than 2022’s average of SGD291 megawatt per hour and the peak of SGD491 megawatt per hour in Oct 2021, it is still much higher than the 5-year average of SGD85 megawatt per hour between 2016-2020.
“We are also guided that the 45%-owned oil shale plant in Jordan has commissioned its first turbine but could incur start-up losses,” said RHB.
While operating results will continue to be affected by accounting anomalies/additional finance cost from index-linked bonds, which has no cash impact, Wessex Water numbers are expected to improve as the tariff has been lifted by an average 9% effective Apr 2023.
Construction of the 48MW IT load hyperscale data centre in Kulai is ongoing and is expected to be in service by quarter one calendar year 2024.
The digital banking division, collectively operated by the consortium of Sea and YTL Power, is expected to commence operations in 2024.
RHB maintains its BUY call.
Downside risks identified by RHB are the weaker-than-expected plant performance, and higher-than-expected operating costs.
