Review

• YTL Power International Berhad (YTLPOWR) reported a stellar performance in 4QFY23 that beat expectations. FY23 core profit of RM2.1bn (more than quadrupled YoY) came in at 339% of ours and 158% of consensus full-year forecasts. The earnings beat was mainly attributed to higher-than-expected contribution from Power Seraya.

• The group declare a second interim dividend of 3.5sen/share (4QFY22: 2.5sen/share), bringing YTD DPS to 6.0sen (FY22: 4.5sen)

• QoQ: 4QFY23 revenue surged 32.3% QoQ while PBT more than doubled QoQ mainly due to greater contribution from Power Generation segment and Investment Holding segment.

• YoY: 4QFY23 revenue soared 56.2% YoY driven by higher retail and pool prices coupled with strengthening of SGD against MYR for Power Generation segment, and higher interest income, higher foreign exchange gain and recognition of accrual technical service income (Jordan power plant project) for Investment Holding segment. Consequently, PBT more than tripled YoY. Notably, telecommunication recorded lower core LBT YoY driven by higher revenue from building base stations (under JENDELA project). Meanwhile, despite tariff hike, Wessex Water is still experiencing core LBT of RM3.0mn after excluding impact from index-linked bonds.

Impact

• We raise our retail margin assumptions for Power Seraya following the extraordinary performance by the Power Generation segment in 4QFY23. Following this, we raise our FY24/FY25 earnings forecasts to RM2.88bn/RM2.95bn respectively.

Outlook

• Power Generation: We are sanguine on the segment and believe that the earnings are sustainable in the coming few quarters considering that the group has locked in fuel costs (natural gas) at competitive price during pandemic when the demand was low. Further catalyst comes from National Energy Transition Roadmap, which would allow YTLPOWR to export renewable energy to Singapore and hence further spur its bottomline.

• Water and Sewerage: Core LBT has narrowed QoQ following the recent tariff adjustment. The group is currently at 4th year of its 5-year AMP and is consulting with Ofwat on the 2025-2030 business plan.

• Telecommunications: With the extension of 5G services in tandem with DNB’s nationwide rollout, the segment could gain more subscriber base in the coming quarters. Nonetheless, we believe the segment is unlikely to turn to PBT yet in the near term.

• Investment Holdings: We are upbeat on YTLPOWR’s 500MW Green Data Centre project. Of note, its 48MW IT Load Hyperscale Data Centre already has Sea Limited as its anchor (taking up 32MW) and is currently under phase 1 of development. The Data centre is expected to be ready for service by 1QCY24. We believe YTLPOWR’s Green Data Centre will continue to attract foreign interests as the world moves towards net zero emission.

Valuation

• Following the upgrade in our earnings forecasts, we raise our TP for YTLPOWR to RM2.40/share (previous: RM0.92/share). Maintain Buy recommendation.

Source: TA Research - 25 Aug 2023