YTL Power surges ahead on Wessex Water tariff upside, data centre growth
Effective April 1, 2025 (FY25), Wessex Water implemented a 21 per cent year-on-year (YoY) hike in metered charges – well above the research firm's earlier assumption of a 13 per cent increase. The steeper tariff has prompted the research house to lift its FY25–FY27 core net profit (CNP) forecasts for Wessex Water by 38 per cent to 52 per cent.
CIMB Securities now expects YTL Power's water and sewerage segment to deliver a strong earnings rebound, with CNP projected at RM242 million in FY25, surging to RM533 million in FY26 (+120 per cent YoY), and RM571 million in FY27 (+7 per cent YoY).
Meanwhile, YTL Power's data centre operations are emerging as a robust growth pillar. Following a reassessment of operating expenditures, CIMB Securities revised its earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin estimate for the co-location (co-lo) data centre segment from 50 per cent to 70 per cent, citing improved cost visibility and scalability. With an existing capacity of 188 megawatts (MW) fully leased, CIMB Securities expects YTL Power to kick-start new phases of development, incorporating an additional 160 MW to come online progressively in FY27–FY28.
As a result, co-lo data centre CNP is forecast to rise from RM115 million in FY26 to RM431 million by FY29. Excluding this expansion, CIMB Securities's fair value estimate for YTL Power stands at RM4.08.
The research firm had earlier revised its overall FY25–FY27 group-level CNP forecasts lower by 7 per cent to 17 per cent, reflecting a more cautious view on Power Seraya and AI data centre contributions, partially offset by improved earnings from Wessex Water and the co-lo data centre segment.
CIMB Securties expects group CNP to decline 17 per cent YoY in FY25 before rebounding by 9 per cent in FY26 and inching up 1 per cent in FY27.
Despite the downward revisions, CIMB Securities has raised its sum-of-parts-based target price for YTL Power, driven by a 72 sen increase in co-lo data centre fair value, a 12 sen uplift from Wessex Water, and an 11 sen boost from lower risk-free rate assumptions.
However, the outlook for Power Seraya remains subdued. CIMB Securities slashed its FY25–FY27 CNP forecasts for the Singapore-based unit by 16 to 31 per cent, reflecting lower-than-expected pool and retail electricity prices for the first nine months of FY25, as well as the earlier expiry of favourable fuel supply contracts.
Seraya's CNP is now expected to fall by 32 per cent in FY25, 12 per cent in FY26, and 15 per cent in FY27. Although near-term EBITDA/MWh assumptions have been revised down, CIMB maintains a long-term benchmark of S$60/MWh, resulting in a 14 per cent cut to Seraya's fair value, or 28 sen.
Overall, CIMB Securities remains constructive on YTL Power's long-term trajectory, underpinned by Wessex Water's strong regulated earnings and the scaling potential of its data centre ventures.
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