KUALA LUMPUR (Jan 28): Having seen its share price tumble about 50% from a recent peak, YTL Power International Bhd's (KL:YTLPWR) current valuation has fully discounted the company's data centre venture, Kenanga Research said in a note.
Kenanga ascribed a valuation of RM1.04 to YTL Power's data centre venture, without which its target price of RM5 would have been RM3.96.
YTL Power's share price slid further on Tuesday, plummeting 8.1% or 26 sen to RM2.96 as at 11am. With some 40.9 million shares changing hands, it is the most traded counter on Bursa Malaysia, followed by parent YTL Corp, whose share price dropped 5.7% or 11 sen to RM1.82.
The release of DeepSeek, which does not need to run on the most advanced artificial intelligence (AI) chips, has presented a new perspective for AI models. Consequently, this sparked a heavy selldown on companies that are along the supply chain of data centres and AI models. Some see DeepSeek as giving a jolt to the investing fraternity that believe that advanced chips are essential for all AI models.
YTL Power has been under selling pressure since Monday, with questions now being raised about future demand for Nvidia chip-equipped data centres.
Kenanga said it does not foresee YTL Power building a data centre and securing graphics processing units without a firm offtaker, meaning it is unlikely that the company is taking excessive demand risk.
“In fact, it is also expected to be able to tailor the chip requirements to the end-user needs, whether it be the latest state of the art chips or otherwise,” it added.
“YTL Power, an Nvidia cloud partner, is slated to be one of the earliest to be receiving the GB200, ie state of the art chips.
“As these most powerful chips should have demand, chief risk lies in timing delay for offtakers as they may evaluate AI strategy. Locally use case may also stem from the desire to build LLMs (such as Malay language trained LLMs)," Kenanga commented.
Kenanga also noted that the steep fall in YTL Power’s share price over the past two days partly reflects its proposed bonus issue of warrants. "The market is likely factoring in dilution impact," it said.
To factor in the full brunt of the dilution on the warrant exercise, according to Kenanga, YTL Power's target price (without its data centre business) would be RM3.45.
YTL Power has been a screaming “buy” stock over the past 12 months amid its Nvidia chip-equipped data centre venture in Johor.
According to Bloomberg data, the stock has seven “buy” and two “outperform” calls in January, with target prices ranging from RM4.70 to RM7. However, a contrarian is JPMorgan’s “underweight” recommendation with the lowest target price of RM3.30.