KUALA LUMPUR (Dec 11): RHB Investment Bank Research has maintained “buy” on YTL Power International Bhd at RM2.42, with a higher target price of RM2.95 (from RM2.72), and has a long-term positive view on YTL Power’s new collaboration with Nvidia.
In a note on Monday, the research house said the two companies will work on developing an artificial intelligence (AI) project to explore new sources of income.
It said the project may also boost the data centre take-up rate in Johor.
“YTL Power’s earnings growth should strengthen upon the successful delivery of the project in the long run, but investors ought to take note that additional capital expenditure (capex) requirements ahead could be rather intensive.
“We are unable to ascertain the earnings impact of this YTL Power-Nvidia deal at present.
“For the current 48MW hyperscale data centre (estimated capex: RM1.5 billion), the contract tenure is more than 10 years, and we estimate it to potentially generate profit before tax (PBT) of RM100 million per annum.
“As such, if we were to extrapolate such numbers to its full capacity, a total 500MW data centre could deliver RM1 billion in PBT (about 30% of our PBT forecast for the financial year ending June 30, 2024). This excludes any potential earnings from AI-specific applications and services,” it said.