Investment Highlights

• We maintain BUY on YTL Power International (YTLP) with a higher SOP-based fair value of RM5.10/share vs. RM2.70/share previously. Our revised fair value implies a FY25F PE of 16x. We ascribe a neutral 3-star ESG rating to YTLP.

• We have raised YTLP’s FY24E net profit by 11% to account for stronger retail margins in the Singapore power unit. We have also imputed the value of YTLP’s collaboration with Nvidia in our SOP valuation. We have not accounted for YTLP Seraya’s new 600MW hydrogen-ready CCGT power plant in Singapore in our SOP as it will only be ready by 31 December 2027.

• We believe that there are 2 parts in YTLP’s data centre (DC) in Johor. First, the AI section, which would house the computing processing infrastructure powered by Nvidia H100 Tensor Core GPUs (graphic processing units) and the non-AI section, which would cater to other customers.

• We ascribe a value of RM9.4bil to the AI data centre (Artificial Intelligence DC), which is the average of 2 valuation methods. For the non-AI DC, we attach a value of RM2.5bil based on a price of RM25mil/MW on 100MW. This is based on the net asset value of RM322.7mil for YTLP’s 12.5MW data centre in Singapore.

• We value the AI DC between RM8.2bil (based on a price of RM235mil/MW on a capacity of 35MW) and RM10.6bil (based on the price of US$45,000/chip for 50,000 H100 chips). The assumption of 50,000 H100 chips implies a capacity of 35MW as a H100 chip uses 700W of power.

• Our assumption of RM235mil/MW is based on a 50% discount to CoreWeave’s valuation of US$7bil on its 70MW data centres in US. CoreWeave specialises in cloud hosting, using various Nvidia GPUs such as H100s, A100s and A40s.

• Although YTLP’s DC is expected to have a capacity of 500MW in total, we believe that it would come in stages. There is a shortage of Nvidia H100 chips currently. As for the non-AI section, we reckon that customers would come in phases.

• For earnings, the 1st phase of 8MW at the non-AI DC is expected to come on-stream in 1Q2024. However, we do not expect rental income from this to be significant due to its small size. As part of the AI DC is envisaged to be completed by the end of 2024F, we believe that earnings would only be meaningful in FY26F. Some of the off takers or customers at the AI DC are anticipated to be Nvidia’s clients.

• YTLP is currently trading at a FY25F PE of 12.5x, which is in line with its 2-year average of 13x.

Source: AmInvest Research - 30 Jan 2024