YTL Power International Bhd’s (YTL Power) 1QFY24 results beat expectations on stronger-than-expected performance from its Singapore’s subsidiary PowerSeraya backed by elevated retail prices against low input costs.
Consequently, Kenanga Research maintains its OUTPERFORM call and raises its FY24-25F net profit forecasts by 33% and 11%, respectively, lifts its SoP-based TP by 13% to RM2.82, from RM2.50, with no adjustment to its TP based on 3-star ESG rating.
“This is to reflect higher PowerSeraya’s earnings on elevated retail margins, partially offset by lower Wessex Water’s earnings on higher interest accruals. However, we keep our annual 6 sen NDPS assumption unchanged.
“We continue to like YTL Power for the robust earnings prospects of PowerSeraya, and huge earnings potential from the new data centre venture,” the research house said in its note today (Nov 24).
The risks to Kenanga’s recommendation include stringent ESG standards in developed markets, regulatory risk in the power sector in Singapore, the new data centre business fails to take off, and sustained losses at telco YES.
Kenanga said YTL Power’s 1QFY24 core profit of RM909.6 million beat expectations at 42% of both our full-year forecast and the full-year consensus estimate.
“YoY. Its 1QFY24 revenue rose 15% on a broad-base improvement for all business segments with PowerSeraya revenue growing 10% on higher retail and pool prices.
“Additionally, investment holding’s revenue doubled as new power plant Attarat Power Company (APCO) started contributing from 4QFY23.
“Meanwhile, its core profit jumped 4x due largely to a 1.5 times jump in PowerSeraya’s earnings on improved margins as well as the strengthening of SGD vs. MYR.
“However, Wessex Water dipped into a pre-tax loss of RM34.8m from PBT of RM25.4 million due mainly to higher interest accruals on index-link bonds of RM156.4 million from RM91.8 million.
The research house added its investment holding turned around to a PBT of RM112.6 million from a LBT of RM6.5 million buoyed by maiden earnings from APCO as mentioned.
No divided was declared as expected as it usually pays dividend in 2H of the year.
