KUALA LUMPUR (Aug 21): YTL Power International Bhd (KL:YTLPOWR) should see earnings accelerate after an underwhelming quarter thanks to rising data centre demand, according to analysts.
CIMB Securities said that YTL Power is currently developing two new data centres (JDC 5 and JDC 11) at its Green Data Centre Park (GDCP) in Kulai. JDC 5 is scheduled for completion by mid-2027 while JDC 11’s completion is targeted for end-2027.
“While tenants have not been signed up yet for these two new data centres, we believe YTL Power has received keen interest, as it typically does not build data centres speculatively,” the research house said in a note on Friday.
CIMB Securities have cut its core net profit forecast for YTL Power by 22% for the financial year ending June 30, 2027 (FY2027), while its FY2028 forecast was lowered to 16%. This cut, according to the house, was mainly a result of lower contributions from PowerSeraya, a wholly-owned subsidiary of YTL Power.
PowerSeraya’s profit before tax in the quarter ended June 30, 2026 reached a four-year low, easing further by 2% quarter-on-quarter to RM258 million.
YTL Power's fourth-quarter net profit fell 48% to RM423.5 million from RM817.7 million, even as revenue rose nearly 14% to RM6.32 billion from RM5.55 billion.
Despite this, the brokerage remains confident in YTL Power’s performance as the planned acquisition of land at Sedenak Tech Park West to develop another data centre campus, coupled with the aforementioned GDCP projects, increased optimism that the contracted capacity may grow at an accelerated pace.
CIMB Securities upgraded its ‘hold’ call to ‘buy’ and raised its target price to RM6.10.
Key risks identified by the house include a slower-than-expected data centre expansion, and a steeper-than-expected drop in PowerSeraya’s earnings before interest, taxes, depreciation and amortisation by megawatt-hour (MWh).
Meanwhile, MBSB Research said in a separate note that PowerSeraya’s losses were offset by stronger performances of YTL Power’s other subsidiaries, namely Wessex Water and Ranhill Utilities Bhd (KL:RANHILL).
“Wessex Water saw a slight decline in revenue by 1.9% year-on-year to RM1.64 billion during the quarter due to the strengthening of the ringgit, but profit before tax was ultimately higher at RM162.3 million (+73.8% year-on-year) mainly due to a price increase as allowed by the UK Water Services Regulation Authority known as Ofwat.
“Ranhill SAJ is expected to continue benefitting from higher tariffs and the management is currently studying the possibility of developing its own water treatment plant.
The house maintained its ‘buy’ call with an upward revision of its target price to RM5.98, from RM5.67 previously.
“We continue to like YTL Power for its strategic expansion into data centres, which are now becoming a new growth area for the group.”