Investment Highlights

• We reiterate BUY on YTL Power International (YTLP) with an unchanged SOP-based fair value of RM6.25/share, which implies a FY25F PE of 15.6x. We ascribe a neutral 3- star ESG rating to YTLP.

• YTLP has declared a final gross dividend of 4 sen for 4QFY24, which brings total gross DPS to 7 sen for FY24 (FY23: 6 sen). The gross DPS of 7 sen implies a yield of 1.9% for FY24.

• Excluding fair value gains of RM202mil on investments in Ranhill Utilities, YTLP’s FY24 core net profit of RM3.3bil was within our forecast and consensus estimates.

• YTLP recorded a decent 4QFY24 core net profit of RM870mil (+25% QoQ). Although pre-tax profit of YTLP Seraya declined by 6.8% QoQ to RM785.2mil in 4QFY24, Wessex Water and the mobile broadband division swung into profitability.

• Wessex Water benefited from a 12% hike in tariff and lower interest and depreciation expenses in 4QFY24. Wessex Water recorded a pre-tax profit of RM69mil in 4QFY24 vs. a loss of RM51.2mil in 3QFY24.

• The mobile broadband unit secured a RM947mil contract to lay a fibre network in Sabah over 3 years. The division registered a pre-tax profit of RM37.5mil in 4QFY24 compared to a loss of RM123.1mil in 3QFY24.

• YTLP Seraya’s pre-tax profit shrank by 6.8% QoQ to RM785.2mil in 4QFY24, dragged by lower sales volume, bonus and ESOS expenses. The bonus and ESOS expenses amounted to RM60mil. Excluding these, YTLP Seraya’s pre-tax earnings would have been flat at RM845.2mil in 4QFY24. Going forward, we believe that YTLP Seraya’s earnings would pick up as tariffs in Singapore have risen.

• YTLP is currently trading at a FY25F PE of 9.6x, which is below its 2-year average of 13x. We believe that the group deserves to trade at a premium as its long-term earnings growth is expected to be positive driven by the AI data centre.

Source: AmInvest Research - 22 Aug 2024