(Feb 23): Shares of multi-utilities company YTL Power International rebounded on Friday from a two-day decline with the majority of analysts continuing to advocate investors to buy the stock following better-than-expected results.
YTL Power rose 3.2% to RM3.90 at 9.15am after 9.56 million shares changed hands on Bursa Malaysia. At the same time, shares of parent company YTL Corporation also rose, up 6% to RM2.28. The country’s benchmark index FTSE Bursa Malaysia KLCI was barely higher.
Analysts still see more upside to YTL Power’s shares even after the recent rally, betting on strong growth prospects of its data center business that will complement its steady earnings from power generation and water-and-wastewater services.
“We are upbeat” on YTL Power’s 500-megawatt data centre project in development, said TA Securities, noting that the first phase has already signed up Singapore-based consumer internet company Sea Ltd as its anchor and may contribute to earnings by the final quarter of 2024.
Shares of YTL Power have surged 53% in less than two months into the year and more than tripled in 2023 buoyed by robust earnings by its Singapore and UK operations that account for the bulk of its revenue, as well as optimism that the company would be able to tap into Malaysia’s renewable energy push.
There were 10 'buy' calls out of 11 analysts covering YTL Power, and one has a 'hold' rating, with a median 12-month target price of RM4.29, implying a further 10% potential gain from the current share price.
“We believe the potential value accretion of its new assets has yet to be fully priced in by the market despite strong share price performance,” said CGS International. The recent share price retreat of 8% over the past three weeks, “offers a good opportunity to gradually accumulate the stock,” it added.
Net profit for the three months ended Dec 31 jumped four times to RM845.12 million from RM198.82 million over the same period last year, according to Thursday’s exchange filing. Quarterly revenue rose 14.26% year-on-year to RM5.37 billion from RM4.7 billion lifted by all key segments.
For the first half, net profit similarly is up four-fold to RM1.69 billion or 20.9 sen per share versus RM372.1 million or 4.59 sen per share over the same six-month period a year earlier.
Maybank Investment Bank, which downgraded the stock to 'hold' from 'buy' on Friday, said earnings momentum has likely peaked, especially as PowerSeraya’s earnings could begin to taper in FY25 as new capacity is commissioned.
“Given the strong share price performance over the past year, we think risk-reward is no longer compelling,” the research house added.