Keep Calm & Think (The Art of Doing Nothing... Recklessly)

The market has turned, with the KLCI sliding by -10pts to 1,619. The major drags were YTL Power and YTL Corp. Both market darlings fell by -8.2% and -5.4%, respectively, after reporting results that failed to meet investors' high expectations.

Let's put things into perspective.

Firstly, the results are not as dire as they seem. Yes, YTL Power's 3Q24 headline net profit contracted by 17.3%, from RM845.1 million in 2Q24 to RM698.7 million. But let’s look at this relatively:

Analysts estimate YTL Power's net profit for FY2024 to be around RM3,000 million. For the last three quarters, YTL Power has already secured 80% of this target, needing only another RM600 million. Even if the company makes no changes from April to June (4Q24), they will still exceed analysts' forecasts by RM100 million.

In fact, YTL Power is recovering lost ground at Wessex Water, which could break even in the next quarter. The water and sewerage business incurred a loss of (RM51.23 million) in 3Q24 and (RM155.5 million) for 9M/FY24. If this position reverses and breaks even, it will instantly plug a RM200 million gap.

Pricing & Valuation: At its all-time high of RM5.47 per share, YTL Power's annualized FY24 PER is only 14.5x, compared to TNB's valuation of 26x. Isn’t that cheaper? Considering YTL Power's geographic and segmental diversity, along with its management's track record in delivering long-term concession cash flows and foresight. After all, YTL Power is undisputedly the first mover in the industry that brought Hyper-Scale Data Centres into Malaysia.

Stay Calm and Think Before Acting Recklessly

In a bull market like this, sellers beware. You might not be able to repurchase a good stock at low prices after selling it, as the bull market can be unforgiving. EVERY WEAKNESS IN SHARE PRICE IS AN OPPORTUNITY TO BUY.