Looking Beyond YTL Power's Short Term Profit Softness
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
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