YTLPower will use the most powerful AI chip GB200 which was just launched by Nvidia hours ago. These GB200 GPUs may be 30x faster than H100 GPUs and consumer 25% less energy.

YTL Power will be among the first to deploy this latest GPU in Southeast Asia at its Kulai data centre park. It will definitely help to attract MNCs like Microsoft and Amazon to utilise its AI data centre in Kulai.

@Permutation, I am not sure if the technical chart reading on YTLP given to you was indeed from iCap Tan Teng Boo. Recently there have been lots of scam groups pretending to be the investment gurus such as Tan Teng Boo, Cold Eye or Koon YY, advertising online to get people into their chat group by sharing fake investment advice. Just beware.

@Permutation, for FY2025, EPS of 50 sen may be on the high side as the AI data centre division will only start contributing earnings from 2H 2024.

Assuming existing business operations from PowerSeraya, Wessex, Jordan and Jawa Power will contribute a total of RM3.2b or EPS of 40 sen for FY2025, and AI data centre will contribute full year RM800m (lowest among analysts' expectation) and RM400m for half year of Jan-June 2025, then YTLP may register full year net profit of RM3.6b or EPS of 45 sen for FY2025.

For FY2026, it will incorporate full year contribution from AI data centre and EPS may hit 50 sen or higher, given that Wessex will get substantially higher water tariff revision for the next 5 year regulatory period starting from 1st April 2025.

I do not want to over play the earnings prospects of YTL Power while the share price is surging up, but rather set a more realistic expectation of the "base" earnings based on my understanding and assumptions on the ongoing businesses.

The AI data centre division is the wild card that I have not been able to grab a firm knowledge on and hence not able to give a reasonable earnings projection. But when I compare the notes on AI data centre division given by analysts such as Ambank, Hong Leong and CIMB, all point to a net profit projection of at least RM800 million for the 1st phase of AI data centre to be ready in 2H 2024, and over RM1.2 billion net profit contribution a year from FY2027 once it is more developed.

Mr. OTB, yes the earnings outlook for YTLP is still looking good despite the efforts of local analysts to overplay the earnings "normalisation" of PowerSeraya.

As I wrote in my last article, PowerSeraya may see profits slightly lower in the current quarter ended 31 Mar 2024 compared to the Dec 2023 quarter, due to the lack of additional profit from long generation into the wholesale pool, after TPC was implemented since July 2023 and the cooler weather in Dec 23 - Jan 24 in Singapore that reduced the electricity demand spikes. That said, I still expect PowerSeraya to report reasonably good earnings of around SGD200 million in this quarter and next, which will contribute about RM700m of net profit to YTLP every quarter.

As CIMB analyst also pointed out in her report last week, Wessex is expected to turn around as early as this quarter ended 31 Mar 2024 and to report some profits from Q4 FY2024 quarter ended 30 June 2024 after the water tariffs are adjusted upwards from 1st April 2024.

Added with improved earnings contribution from Jordan Power and steady earnings from Jawa Power, YTL Power should be able to maintain a net profit of RM800m+ every quarter going forward from existing operations of PowerSeraya, Wessex, Jordan and Jawa Power. This will support an EPS of at least 40 sen a year for YTL Power, before new earning streams kicking in from data centre division, Yes 5G turning around, UK Brabazon property after handling over the keys to 1st batch buyers, WTE plant, digital bank, new 600MW hydrogen-ready CCGT of PowerSeraya from 2028.

Mr. OTB, the electricity tariff in Singapore is determined by EMA every 3 months, based on the vesting contract parameters determined every 2 years and based on prevailing crude oil prices and FX every 3 months.

The tariff for Jan-Mar 2024 has been determined in Dec 2023 for a 4.3% increase, which was inline with higher forward crude oil prices for these 3 months.

The vesting contract parameters were last reset in end of 2022 for the 2 years from Jan 2023 to Dec 2024, with the capital costs revised substantially to reflect the inflated costs for new builds and the WACC also revised up to reflect the higher interest rates. In short, the vesting contract non-fuel gross margin was revised higher to SGD52/MWh for all gencos using F-class CCGTs.

Going forward, the electricity tariff will be adjusted according to the prevailing crude oil prices and FX movements, and the non-fuel margin will continue to be revised every 2 years, with the next review by end of 2024.

With inflation still running high, we can expect capital costs to be set higher, and with interest rates at decades high, we can expect the WACC to be revised up slightly, both will result in a higher non-fuel margin to the gencos.

Crude oil prices are forecast to be higher in 2H 2024 with supply just matching demand, so all in I expect electricity tariffs in Singapore to move higher in months ahead.

You can see the wholesale prices are moving higher in March 2024 compared to the low in Feb 2024.

Haha Michael Chan, I like your style, always positive. Lets hope for Genting to soar to the moon in 2024!

@edwin387, to your question whether you should cut loss now and buy back cheaper, I do not have the answer, as I cannot predict how share price will move in today or next few days.

Nobody knows how low the share price will correct to, though technical charts sometimes may provide some guide, but it is not absolute.

You need to assess the risk of selling it now at a loss but cannot buy back lower, and the risk of holding it on to see it trending lower for weeks but win it back months later, and see which probability is higher.

Coreweave almost achieved a valuation of US$7 billion last Sept after it secured the multi-year deal with Microsoft.

https://finance.yahoo.com/news/coreweave-nears-stake-sale-fidelity-181908024.html

I believe the valuation given by some local analyst such as AMmbank Huey Ling or HL analyst for the AI data centre business of YTL Power is not without basis. I extract out the sentences written by Ammbank analyst in valuing the data centre business:

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.

Coreweave almost achieved a valuation of US$7 billion last Sept after it secured the multi-year deal with Microsoft.

https://finance.yahoo.com/news/coreweave-nears-stake-sale-fidelity-181908024.html

I believe the valuation given by some local analyst such as AMbank Huey Ling or Hong Leong analyst for the AI data centre business of YTL Power is not without basis. I extract out the sentences written by Ambank analyst in valuing the data centre business:

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.

This is another example how AI data centre deal was announced. It was a multi-year multi billion deal secured by CoreWeave with Microsoft.

https://www.cnbc.com/2023/06/01/microsoft-inks-deal-with-coreweave-to-meet-openai-cloud-demand.html

@edwin387, it is okay if you have bought YTL Power at around RM4.00, the timing may be unfortunate for you as the share price is under correction.

However, always go back to fundamentals and look back why you put your money into this stock in the first place. It is the good prospects of the company earnings and tremendous upside from its AI data centre venture with Nvidia. There may be a lull in terms of good news around the company in the past few weeks and next few weeks, and this gives the opportunity to the bears to press down the share price. But I believe over the longer term, the share price will go up past RM4.00 again when steady quarterly earnings kick in and data centre division starts to contribute earnings to YTLP.

There is always risk in stock investment and there is always blips along the way for a long rally of a stock. Just stay invested and ride through the correction phase.

It is normal for AI data centre deals to be announced without much detail as these are very sensitive data.

It suffices to say where the AI data centre will be located and total investment value, and most importantly the data centre will use the highly sought-after Nvidia H100 GPUs and software. Industry players will know how significant it is. CoreWeave is a good example.

https://venturebeat.com/ai/coreweave-came-out-of-nowhere-now-its-poised-to-make-billions-off-of-ai-with-its-gpu-cloud/

It is normal for AI data centre deals to be announced without much detail as these are very sensitive data.

It suffices to say where the AI data centre will be located and total investment value, and most importantly the data centre will use the highly sought-after Nvidia H100 GPUs and softwares. Industry players will know how significant it is. CoreWeave is a good example.

https://venturebeat.com/ai/coreweave-came-out-of-nowhere-now-its-poised-to-make-billions-off-of-ai-with-its-gpu-cloud/

No doubt Empire Resorts or Resorts World Catskill is lacking behind in terms of market share for mobile betting, but as shown in the article, the prospect is good and the pie can be large enough for Empire Resorts to achieve its target market share and help it to turn around.

Posted by Michael_chan2022 > 57 minutes ago | Report Abuse

https://rwcatskills.com/resortsworldbet/
Resorts World Catskills

https://theedgemalaysia.com/node/704256
Genting’s Resorts World Bet achieved US$500,000 wagering revenue in February — report

Sources on the ground indicated that the 1st phase of data centre for SEA Group at Kulai has just been completed and will start contributing some profits to YTL Power from Q4 FY2024.

The 1st phase of AI data centre is on track for completion in 2H 2024.

Mr. OTB, yes I saw the latest update report from CIMB last Friday.

Its earnings projection for FY2024 indeed does not include any profit contribution from data centre division, the net profit projection of RM3.15 billion for FY2024 comes from contributions from existing ongoing businesses including PowerSeraya, Wessex, Jordan and Jawa Power, and some losses from Yes 5G.

CIMB projects a net profit contribution of about RM400 million from the data centre division for FY2025, ramping up to about RM1.0 billion in FY2026. I cannot say whether this is too bearish or too bullish on the data centre division, but it looks similar to projections from RHB analyst who projected a net profit contribution of up to RM1.2 billion from the data centre division from FY2027.

Of note is the low earnings projection from ongoing businesses for FY2025 and FY2026. CIMB analyst is obviously very cautious on the PowerSeraya earnings prospects, and I think is over bearish on the "normalisation" of earnings in PowerSeraya towards 2026. She may be right that PowerSeraya might have peaked in Q4 FY2023, when pool prices were spiking high and PowerSeraya benefited from selling extra long generation into the pool and earned extraordinary profits to the tune of SGD30 million per quarter, as per what Sembcorp had indicated too.

But I think PowerSeraya will continue to deliver good profits of SGD200-220 million per quarter going forward until 2026, purely based on the retails electricity market and vesting contracts which now offer a gross margin of SGD60/MWh. PowerSeraya's exposure to the wholesale market remains below 5%.

Furthermore, Wessex is expected to turnaround from April 2024 after it secures a new round of water tariff hike for the year beginning from 1st April 2024 to 31 Mar 2025. Interestingly, CIMB report says Wessex will impose at least 11% increase in average water bills from 1st April 2024, this is much higher than I expected (to be around 3.5% to 7.5%).

Wessex is expected to achieve total revenue of GBP560 million for FY2024 ended 31 March, so a 5.5% rise in water tariffs will increase its revenue by GBP31 million for FY2025 and a 11% increase in water tariffs as CIMB expected will increase Wessex' revenue by GBP62 million for FY2025.

Sources indicated to me that today's selling could have been due to one investment bank dumping the hedged mother shares for a call warrant expiring today.

It was trying to press down the closing price so that the settlement price for the call warrant will be lower and also it does not intend to issue any new call warrant on YTLP.

This is good to me as less call warrant will be issued and less impact from these call warrant issuing banks on YTLP share price movements

YTL Power share is going through consolidation now after surging some 60% YTD due to aggressive foreign buying in early January 2024. It is hence entirely normal for early investors including some short term foreign funds to lock in some profit, but I do not believe these funds have completely exited, as seen from statistics that foreign funds bought in a total of RM150m worth of YTL Power in the month of February, ahead of the inclusion of YTL Power into MSCI.

Many investors have missed out on the rally of YTL Power, including the majority of local analysts and local institutional funds. It is only natural for them to hope for a bigger correction in YTL Power share price in order to get into this promising company.

I do not know how much and how long the correction may take for YTL Power share price, so I don't really bother to look at the daily share price movements, but always fall back to fundamentals.

Naysayers and those who missed out earlier on YTL Power are telling all sorts of negative comments like over-valued counter lah , big funds dumping lah, AI data centre venture with Nvidia has no detail announced lah, YTL Power earnings will see big drop in earnings from FY2025 lah, blabla bla.

I would just ignore such noise and get back to the facts and figures:

YTL Power remains the cheapest utility stock in Bursa with forward PER of just 9.0x, compared to over 20x PER for Tenaga, PetGas, GasMalaysia, Dialog etc.

YTL Power is set to deliver another record earnings for FY2024 ended June with net profit of over RM3.0 billion from RM1.9 billion in FY2023, even the most conservative Maybank analyst projected a net profit of RM2.986 billion for FY2024. That's for a superb 57% increase in net profit y-on-y. Which big cap in Bursa could possibly deliver such a huge profit jump in a year??

With so many new projects taking off in months to come, YTL Power earnings will continue to grow in FY2025 and beyond:

1) Wessex Waters to turn around from April 2024
2) Jordan Power to deliver full PPA earnings from early 2024
3) Yes 5G to break even by end 2024
4) digital bank to start contributing profit in 2-3 years or by 2027
5) WTE plant to start contributing profit from 2027
6) PowerSeraya new 600MW hydrogen ready CCGT to start contributing profit from 2028
7) UK Brabazon property project to contribute meaningful profits from 2025
8) 1st phase data centre with SEA Group to start contributing profit from 2H 2024
9) 1st phase AI data centre with Nvidia to start contributing profit from end 2024
10) potential clinching of new solar power project in Malaysia from new LSS tenders

There may be a lull of 2-3 months before the new profit contribution can be seen in 2H 2024, so it gives an opportunity for shorties and those who want to buy cheaper to smear the image of YTL Power and to play down on its earnings prospects.

I would just stay put with my holdings on YTL Power and may add positions if share price falls further to unreasonably cheap levels.

Good summary, MR. OTB.

Agreed that AI data centre business will drive YTL Power to new highs in next 2 years.

@Permutation, Genm has more near term catalysts while Genting is more undervalued and has greater long term upsides.

Genm for one announced a better than expected quarterly result for Q4 FY2023 while Genting disappointed with a weak result dragged down by impairments at Genting Singapore.

While the outlook for both Genting Highlands and Genting Singapore are bright as both Malaysia and Singapore have allowed visa free travels from China and India, I am not sure if there will be more impairments at Genting Singapore in coming quarters.

Next, Genm will have a good chance to dispose off its Maimi land in 2H 2024 when US Fed starts cutting rates, that will be a good catalyst to Genm share price, I believe.

New York city council will be launching the RFP to solicit interests for 3 new full casino licenses and Genm shall stand a good chance to clinch one of the licenses. As I calculated in my article, the potential from a new casino license in New York is huge and that will be another catalyst to Genm.

Genting long term is still very good, underpinned by Sentosa 2.0 expansion by Genting Singapore. I expect Genting Singapore earnings to expand by at least 40% to achieve EBITDA of close to SGD1.8b - 2.0 billion by 2030 when the expansion completes.

Whether Genm or Genting is better, I will leave it to you to decide one that suits your investment horizon. I have both.

@Permutation, I suggest you consult Mr. OTB on Yinson as he has done extensive studies on this company, while I have not.

decent closing today for YTL Power with more muted trading volume.

It is good to see that YTL Power shares are cooling off a little bit lately, as a slew of good news and good developments at the company has sparked a major re-rating of the stock:

1) Inclusion into KLCI component index in early Dec 2023
2) announcement of collaboration with Nvidia to develop AI data centres in mid Dec 2023
3) winning the EMA tender for development of a new 600MW hydrogen-ready CCGT in Jan 2024
4) announcement of inclusion into MSCI in mid Jan 2024 and official inclusion on 29 Feb 2024
5) approval for the Brabazon property development project with enlarged plan of 6,500 homes and 4m sf commercial area

Any long rally of a stock will need a pause for it to consolidate gains, also to allow some early investors to take some profits and for late comers to get into the stock on profit taking.

If we take a longer term view of 12 months-24 months, this stock has been performing in a fantastic form, way better than our initial expectation. So it is entirely normal for people to take profit and adjust their portfolio.

But if I look around Bursa stock universe, it is really hard to find another stock with better prospects and earnings certainty than YTL Power & YTL Corp, big cap, liquid, high trading volume, cheap valuation, etc all favoured by foreign funds.

If we think foreign funds will come into Bursa in a big way and Bursa will see a bull run in 2024 and 2025 as envisaged by iCap Mr. Tan Teng Boo (who expects KLCI to test 2,500-3,000 points in next 2-5 years), which stocks would foreign funds look at favourably?

Tenaga?? no, latest Q4 very weak, Manjung plant down on unplanned outage till 2024 end/2025, high receivables over RM10 billion, tight cashflows and working capital, super high capex of over RM50 billion in next few years, high borrowings and doubling interest expenses from higher capex spending, etc.

bank stocks? Maybank and RHB Bank maybe for decent dividend yield of 6% p.a. but growth is limited hence share price upside is limited

other utilities stocks? TM? definitely no as its unifi business is seeing huge threats from 5G operators who are offering cheaper and faster wifi solutions

Pet Gas? also no due to high valuation of over 30x PER

Dialog? maybe as Q4 earnings are solid but still valuation is double of that for YTLP

what else? IHH for 35x PER?

any other stock traditionally favoured by foreign funds?

Agreed that US dollars are high against ringgit now, and it may come down later this year when US Fed starts cutting rates.

FX only affects the paper accounting value, so I won't bother much. More importantly it is for Genm to win one of the 3 casino licences in New York.

@Jack Khan, you are probably right there.

As Genm owns 100% equity stakes in Resorts World New York City at Queens which I believe will house the new New York full casino when the new license is awarded, the capex required will not be too big, reportedly at around USD1.0 billion, half of which is for the bid bond.

Genting group has already raised sufficient fund for the US$500 million bid requirement, it may probably spend another USD500m to upgrade the facilities at RWNYC in order to roll out full casino products.

To enhance its bid, I do not rule out the possibility of GNM robing in a local partner to win one of the full casino license.

On the potential earnings contribution to YTLP from the Brabazon project, I have previously not included it as the master plan was not approved yet. Now the plan has been approved (on 29 Feb 2024) and it entails exactly the sizing as envisaged in the 2023 Annual Report.

Without assess to more detailed development plan, I will just do a quick estimation here on the potential earnings contribution from the Brabazon project to YTLP.

The approved plan envisages development of 6,500 new homes and 4 million sf of commercial floor area in Bristol. Using the national average house pricing in the UK of about GBP275,000, I estimate that the total GDV for the 6,500 new homes may amount to GBP1.8 billion. Using a rough gross profit margin of 25%-30%, I estimate that total development profit for the 6,500 new homes may amount to GBP500 million over the next few years.

Assuming development over 10 years, average gross profit will be GBP50 million a year. Applying UK corporate tax rate of 25%, net profit contribution to YTLP may come to GBP37.5 million or RM225 million a year over next 10 years.

Then for the 4 million sf of commercial area, the potential rental income may be huge too. Online checks show that Bristol commercial / office rental rates are between GBP25-30 psf per annum. So for the proposed 4 million sf of new commercial area, the potential gross rental income may amount to GBP100 million to GBP120 million per annum. Deduct off 25% for miscellaneous charges for property management, the net property income may come to GBP80 million to GBP90 million per annum. Again deduct off 25% corporate tax, net earnings contribution to YTL Power may be GBP60 million to GBP67.5 million, or RM360 million to RM405 million a year to YTL Power.

That's my rough estimation - RM225 million a year of net profit contribution to YTL Power from this project, increasing over time to as much as RM630 million a year when the commercial area is fully developed. After all the new 6,500 homes are delivered, the recurring income will be from the commercial area which may contribute over RM400 million of net rental income to YTLP every year.

@Probability, thanks for highlighting the approval news of the Brabazon project in the UK.

This property development project has always been under YTL Power, as YTLP management has acquaintance with the Bristol council in dealings for Wessex Waters which is located nearby in Bath.

I think YTL Power has 100% equity stakes in this Brabazon project, as stated by the following statements in YTLPower 2023 Annual Report:

"Brabazon
YTL Developments UK Limited (“YTL Developments”), a wholly-owned
subsidiary of YTL Property UK, is undertaking one of the
UK’s largest master planned developments, located on the former
Filton Airfield site. Brabazon Bristol is a 380-acre mixed-use urban
development and the Group’s first UK property development
project.
Awards won this year include Residential Project of the Year (36
Homes and Over) – Michelmores Property Awards 2023;
Residential Developer – Insider South West Property Awards
2023; and Developer of the Year – Bristol Property Awards 2022.
Masterplan Densification
Planning approval from South Gloucestershire Council is currently
pending for the proposed update to the development’s Masterplan.
The approval will allow the new Masterplan to deliver up to 6,500
residential homes, student accommodation units, 4 million sqft of
commercial floor area and approximately 1 million sqft of
educational and community facilities."

I believe that the construction work for this massive Brabazon property development project will be undertaken by YTL Corp's construction arm. The total construction work may be worth over a billion pounds (>RM6.0 billion) to be awarded to YTL in next few years.

Genm is under-valued. The value of either its US assets or RWG alone is higher than Genm's market cap now.

https://klse.i3investor.com/web/blog/detail/dragon328/2024-03-01-story-h-187411830-Genting_Malaysia_RWG_Soaring_High_in_the_Year_of_Dragon

For leisure read

https://klse.i3investor.com/web/blog/detail/dragon328/2024-03-01-story-h-187411830-Genting_Malaysia_RWG_Soaring_High_in_the_Year_of_Dragon

200 million shares traded at RM3.95 in the last minute, big big funds.

Looks like big chunks of shares changing hands between major shareholders and foreign funds, or local institutions and foreign funds, besides call warrants issuing banks dumping all they had to press down closing price.

crazy volume of over 265 million volume transacted in last minutes

There is no point arguing it at this moment after it just delivered a weak set of results.

Lets see in 3 months time.

True that PBA has not gained enough investor confidence as its earnings record in the past few years is not consistent, and dividend so far has not been very good given the low water tariffs.

I believe after the water tariff is revised up and PBA starts to deliver solid earnings for 2 or 3 quarters then investors will have more confidence and give a higher PER.

It was the same case as in YTL Power. It was trading at unjustifiably low valuation of 5x PER last year, when most analysts played down on its prospects. But now analysts have to upgrade their target price and give a fairer PER of 10x to 15x, after YTLP delivered 3 consecutive of strong earnings.

I think once PBA delivers a good improved profit for Mar 2024 and reinforces the strong earnings in June 2024, then investors will have a different look at it.

In Q4 statement, PBA stated that it had about RM170m of capital allowance as of 31 Dec 2023 to set off against future taxable profits. So this will be enough to set off against most of the taxable profit in 2024 so the effective tax expense in 2024 will be very low like in 2023 when income tax expense was only RM4.7 million (cash tax payment was also about RM4.7m).

On deferred tax, PBA claimed positive deferred tax of RM44m in 2022 then it reversed some of it in 2023 and recognised negative deferred tax charge of RM34m. As a result, deferred tax liabilities increased from RM99m as of 31 Dec 2022 to RM128m as of 31 Dec 2023.

I am not sure how this deferred tax charge will affect PBA net profit going forward. Any accountant here who can advise?

@jackson1688888, you can argue that PER of 15x should only apply to growth stocks, but I can argue that PBA can be considered a growth stock as it has just secured a substantial hike in water tariffs, and hence its earnings for 2024 and 2025 will grow substantially, then 2026 earnings will grow organically based on water consumption growth in Penang.

Come 2027, it can apply for another round of water tariff hike as its average water tariff will still be among the cheapest in Peninsular Malaysia. Earnings will grow further when it secures another water tariff hike in 2027. Then by 2030, there will be another round of water tariff hike review. Not a growth stock?

Even the assumption of 15x PER only for growth stocks is also not entirely true. Take a look at Tenaga and PetGas, both earnings will only grow organically based on electricity demand and gas consumption in Peninsular. Why are they trading at PER of over 20x?

Even if I apply a lower PER of 10x, PBA should be worth RM3.90.

At 8x PER, PBA should be worth RM3.09

@jackson1688888, I don't think that because of a relatively smaller company like PBA, it does not deserve a PER of 15x.

For comparison, Ranhill which is comparable to PBA in size is trading at PER of over 25x.

Solarvest, a company smaller than PBA, is trading at PER of over 20x.

A lot of smaller companies are trading at much higher PER.

@Bullstock888, yes I concur with your view above.

PBA's Q4 was dragged down by negative deferred tax, a 180 degree change from positive deferred tax in Q3. This is non cash, and I will just ignore them.

PBA recorded PBT of RM68.4m in 2023, this would have been higher if the ICPT surcharge rate was reduced for the whole year, but it came into effect only from July 2023.

Operating cashflows before working capital changes and capex amounted to RM112 million in 2023, which was very strong.

Post water tariff hike from 1st Feb 2024, PBA expects revenue to increase by RM86 million a year. Assuming operating costs remain unchanged, PBT will increase by RM86m.

I take a more conversative approach and assume operating costs to increase by 10% or RM27m in 2024, and so I expect PBT to jump by about RM60m to RM128 million.

Ignoring deferred tax effect, the normal income tax should be minimal as PBA has got enough capital allowance to offset against future taxable profit, so net profit will come to also about RM128 million or EPS of 39 sen.

PBA is a well run utility company and should enjoy PER of 15x (note Tenaga at 23x PER, PetGas at PER 20x), so PBA may be worth RM5.80 a share post water tariff hike.

@Activetrader, I concur with your view above.

Genm is going to see multiple re-rating factors soon.

Tenaga just announced its Q4 result with net profit drop to RM480m, making the full year net profit at RM2.77b, lower than concesus. EPS for 2023 comes to 48 sen, making Tenaga trading at a PER of above 23x.

This makes YTL Power relatively cheap at PER of lower than 10x on FY2024 earnings. I think this will make it easy for foreign funds to make a choice in terms of exposure to the utility sector in Malaysia.

Hence, even if YTL Power trades up to RM6.30 at 15x PER, it will still be cheaper than its peers like Tenaga, PetGas and Dialog.

@pang72, YTL is still playing catchup with YTL Power which has gone up 5x from RM0.70 to RM4.20, YTL will surely go up from RM0.50 to RM3.00 in time.

Then both will continue scaling new heights!!

While the hyperscalers like Google, Amazon and Microsoft are trying to do load shifting between their data centres around the world to reduce carbon emission, why not just shift some of the data centre loads to YTLP's Kulai data centre park which is powered by 100% RE?

Posted by Mabel > 5 hours ago | Report Abuse

https://www.thestar.com.my/business/business-news/2024/02/27/ai-explodes-data-centre-energy-use

Nvidia Corp chief executive officer Jensen Huang has said AI has hit a “tipping point.” He has also said that the cost of data centres will double within five years to power the rise of new software.

The fact of the matter is that AI data centre is going to be big, or is already very big, as evidenced from Nvidia's latest quarterly results that showed that Nvidia derived about 80% of its revenue from AI data centre division, about USD18 billion and growing.

YTLP's collaboration with Nvidia at its Kulai data centre park is already starting to see real progress as YTL has been carrying out the infrastructure and construction work there and Nvidia has promised to supply the highly sougth-after H100 GPUs once the site is ready.

YTLP in the latest analyst briefing after the Q2 quarterly result reiterated good progress of the AI data centre project, with the first phase of AI data centre to be ready by end 2024 and a 100MW capacity target in the medium term.

As I do not know the details of the deal, I can only analyse from a top-down view of a general project basis. Assuming an equity IRR of 15% for the project, total project costs of RM20b, debt financing of 80%, and 20 years of operation and cashflows, I get a starting revenue of RM2.5 billion a year and a net profit of RM650m at initial years rising gradually to RM2.0 billion a year after project loans are paid off after 10 years.

So net profit may average RM1.3 billion a year for the 100MW AI data centre project, not too far off from RHB analyst's projection of RM1.2 billion a year.

If someone keeps shouting to want facts & figures, the relevant info is already out in the public. Please do your own analysis and projections to get the numbers you want. Do not simply shout scams or liars to the air.

I suspect this guy may be from a competing company on data centre business in Malaysia, and talk down on YTLP's prospects on the AI data centre, but he wouldn't get any benefit in doing so as real data centre business clients would not listen to such nonsense.

Then he might have sold off his shares in YTLP and hence is trying to talk bad and press down the share price of YTLP. Again, he would not achieve anything out of this, as his words have no bearing in this forum by simply talking blank.

Whatever it is, I will not bother nor respond to this guy anymore.

Below is the Bursa announcement by YTL Power on the collaboration with Nvidia for the development of AI data centre at its Kulai data centre park. PMX also announced the deal to be RM20 billion on the same day. This shows to me and to the market that the deal is real, and not a fishy project with no official announcement as claimed by certain parties with malicious intent.

Of course, there was not much detail of the deal in the Bursa announcement, as any business deal info is sensitive and confidential. You wouldn't expect the company to announce all the details of the deal including returns, % capital contribution, form of collaboration to the public, as it would jeorpadise the business negotiation with potential clients later.

https://www.bursamalaysia.com/market_information/announcements/company_announcement/announcement_details?ann_id=3407239

Genting Singapore weak Q4 result was mainly due to kitchen sinking activities where the company booked in higher impairment for trade receivables, penalties and write-offs, and higher non-cash depreciation charges.

I see no alarm over Genting Singapore business as its cash balance ballooned to SGD3.9 billion as of 31 Dec 2023, and China tourists to Singapore are back to 100% pre-pandemic level. Maybank analyst expects the high impairment on trade receivables and penalties will not recur in 2024 and beyond.

I still see Genting Singapore to grow its EBITDA towards SGD1.4 billion by FY2025.

So what if YTLP were to fund the entire project cost?

YTL Power has about RM1.5-2.0 billion of cash at the holding level and strong operating cashflows of RM6 billion a year. It will have no problem coming out with the equity money of RM4b to fund this, and I expect no issue of it getting lenders to lend to the project.

YTLP is innovative in finding funding for its projects. Last time for building the Malaysian power plants, YTLP went for IPC listing to get billions of ringgit funding well before the power plants were commissioned.

Think twice before you want to tarnish the image of a great company.

Why are some parties so hung up with capital contribution to AI data centre?

YTL Power will come out with all the capital money required to fund the traditional data centre secured with SEA Group, the 1st phase capital was announced to be RM1.5 billion and YTLPI has secured necessary funding of 80% to fund it. Lenders were comfortable with the project returns then only they would lend 80% to the project.

For all the utility projects YTLP was involved before, such as the Paka & Pasir Gudang power stations, the Jordan power plant etc, in which case didn't YTLP come out with all the necessary funding to fund the projects? And each has proven great success!

PMX has already mentioned the total capital outlay for the AI data centre project would be RM20 billion, and various foreign news sources also stated similar figures of USD4.2 billion. Still certain parties are not convinced with this. Why we care if YTLP were to contribute RM10b or RM20b of capital to fund the project, as long as it is a good project in high demand now, the project will give good returns, as what we can see from latest Nvidia results that show increasing revenue from its AI data centre business.

The press statement on the AL data centre collaboration between YTLP and Nvidia typically does not give much detail on the deal. I also will not bother to speculate on the % shareholding of each and % capital contribution to the JV. As I always trust the ability of YTL Power management to strike good deals that give double-digit IRR.

In any case, the market has not given any value to the AI data centre business which has yet to contribute any earnings. As written in my article, YTL Power current earnings base of RM3.4 billion or EPS of 42 sen can be sustained with its existing operations from PowerSeraya, Wessex, Jordan and Jawa Power.

Taking the more conservative valuation by Mr. OTB at 12x PER, YTL Power should be worth RM5.04 based on current earnings base.

I am a little more bullish to peg a higher PER of 15x, as I see more foreign funds will come into Bursa later this year, and KLCI general market PER is 15x. I see no reason why YTLP should be trading below the general market PER of 15x, as it is big, liquid and growing. I see good chance of it hitting RM6.30 before AI data centre business starts contributing earnings.

I will only assess the earnings potential of the AI data centre segment after it starts reporting profit in 2H 2024.

@jeffchan1901, on the issue of weak ringgit, it is really a matter of strong US dollars and US Fed actions over the next few months. US Fed has aggressively raised interest rates to 5.5% in past 12 months, higher than our OPR now by about 200 bps. Obviously some foreign funds will pull back funds to the US to enjoy the much higher bond yields there, and that puts pressure on emerging market currencies including ringgit. Singapore dollar is more or less pegged to the US dollars with MAS managing it well to contain inflation there.

Foreign funds have been pouring money into Bursa Malaysia since early Jan 2024, in fact towards end of Dec 2023. We can see YTL and YTL Power share prices started climbing up by 5%-10% towards end Dec 2023 after both were included into KLCI component in mid Dec, so there was a lag of about 2 weeks.

Foreign funds typically come into Malaysia when they see upsides in the currency over next few months. Economists are predicting ringgit to appreciate to RM4.50-4.40 by end 2024, that is likely to be inline with the timeline for US Fed to start cutting interest rates in 2H 2024. When US Fed starts cutting rates, now expected to start in June, bond yields there will drop and some funds will find it less attractive to hold and take profit as bond prices climb up (when yields drop). Some of these funds will look for higher returns elsewhere.

I am confident many of these funds will find Malaysia stock market very attractive, especially with the backdrop of an appreciating ringgit in next few months. Say if ringgit appreciates by 10% to RM4.40 level, foreign funds that buy into Bursa stocks now will enjoy additional upside of 10% when they exit end of 2024 when ringgit indeed goes up to RM4.40 level.

Statistics shows that foreign funds still accumulated shares in YTL Power in early February, while they may have paused in past 2 weeks after the share price hit RM4.24 peak. I expect new wave of foreign funds will pour into YTL and YTL Power next month after these 2 stocks are officially included into MSCI.