The biggest news to make into the corporate segment of the media is on YTL striking a deal with AI chip company Nvidia, according to statements, YTL Power’s 60%-owned YTL Communications is collaborating with Nvidia to develop artificial intelligence infrastructure powered by Nvidia’s technologies and that the infrastructure will be hosted at YTLP’s data centre park in Kulai, Johor and is intended to provide AI computing services to the country.
MIDF calls this a strategic edge. An AI data centre is essentially a specialised facility designed to support computational and storage requirements of AI applications. AI data centres typically incorporate high-performance computing hardware, such as GPUs (Graphics Processing Units) or TPUs (Tensor Processing Units), which are specifically designed to handle intense computational demands of machine learning and deep learning tasks. Nvidia’s H100 GPU is in high demand (with lead time reportedly up to 52 weeks) given leading edge generative AI capabilities and are critical components of advanced data centers, hence getting access to these hardware gives YTLP a strong advantage. Additionally, the H100 is currently banned for sale in China given US trade sanctions, which could partly explain the influx of data center investments into ASEAN.
However details were scarce, as there were no official details on capacity or capex were released, but the first phase of the AI data centre is expected to be operational by mid-CY24. MIDF reckons it could be part of YTLP’s Phase 1 data centre rollout which could explain the rather short time to operationalisation. Sea Ltd has committed to be the anchor tenant for 32MW of the initial 48MW capacity being constructed with the first 8MW of the 32MW expected to come onstream in 1QCY24, while the remaining is to be rolled out over the next 3 years till CY27. However, the entire Phase 1 facility could accommodate up to 72MW capacity suggesting ample room to cater for the AI data centre.
YTLP’s 664ha Kulai land is slated to accommodate long-term targets of 500MW data centre capacity and 500MW solar generation capacity to power the data centres. Capex for the first 48MW of YTL’s Green Data Centre is estimated at ~RM1.27b, or RM26m/MW. We reckon capex for the AI data centre could entail a premium given more advanced hardware to be employed.
The house is keeping with the numbers pending further clarity on the deal but view this broadly as a positive development. It still reaffirms a BUY on YTLP at unchanged SOP-derived TP of RM2.99. MIDF continues to like YTLP for Exposure
to recovery in the Singapore electricity market, Strategic expansion into data centre and RE. And also a potential beneficiary of the strong RE growth trajectory under NETR, particularly for RE exports given its presence in the Singapore power sector. Valuation is undemanding at just 6.8x FY24F PER while dividend yield of 7.4% (DPR: 50%) is attractive.
