KEY INVESTMENT HIGHLIGHTS

• FY24 earnings exceed expectations
• Lower generation units from Seraya but pool prices higher
• Within timeline in receiving NVIDIA chips for AI DC
• Maintain BUY with a revised TP of RM6.20

Exceed expectations. YTL Power's (YTLP) FY24 result came in above expectations. The group reported a 4QFY24 net profit of RM1.07b, bringing cumulative 12-month core net profit of FY24 to RM3.45b, exceeding our/consensus full year estimates by 10.5%/9.6%. An interim dividend of 4 sen/share was declared, bringing FY24's DPS to 7 sen.

Key takeaways. Group revenue rose +22.9%qoq, leading to a +51.3%qoq surge in PBT on the back of a surprise rebounds into the black during the quarter by Wessex Water and the group's telco business.

These managed to surpass the slightly lower PBT by Power Seraya of - 6.8%qoq and led to a higher PBT during the quarter. There were slightly lower generation units sold by Power Seraya on top of higher overhead due to bonus payments and ESOS but these were offset by higher pool prices during the quarter. Management guided that it is able to maintain its market share and that margins are stable. As for Wessex Water, it benefited from the 12% tariff increase in Apr-24 while the telco business rebounded due to the ongoing progress of its RM947m Point of Presence (PoP) project laying fibreoptic cables in Sabah.

Delay in AI DC coming online? Clarifying the concerns surrounding potential delays in Nvidia's Blackwell chips as the latter revamps the design reportedly due to a design flaw, management guided that they were still well within the timeline of receiving the supply by 1QCY25. The NVIDIA AI DC which is parked under 60%-owned YTL Communications, has a medium-term target of hitting 100MW AI DC capacity though this could involve much higher capex (estimated at USD4b or RM180m/MW) given more advanced hardware employed, especially for NVIDIA's H100 & GB200 GPUs, compared to an estimated RM25-30m/MW for a typical IT load DC. In the longer term, YTLP's 664ha Kulai land is able to accommodate up to 500MW DC capacity.

Plans for Ranhill Utilities. As part of the transition phase after acquiring a controlling stake in Ranhill Utilities, management meetings are being held with the respective divisions of YTLP's latest subsidiary. Among plans were to improve water treatment, supply and the facilities.

YTLP had recently appointed five new directors to the board. Tan Sri Hamdan Mohamad resigned as group CEO yesterday, about three weeks after stepping down as executive chairman, together with several other board members.

Source: MIDF Research - 22 Aug 2024