KUALA LUMPUR, Dec 5 (Bernama) -- Bursa Malaysia closed lower on Friday amid mixed regional market performance as investors turned cautious over a possible rate hike by the Bank of Japan (BOJ) and upcoming US economic data that may influence the Federal Reserve’s (Fed) interest rate decision next week. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) pared most earlier losses to settle 4.55 points easier, or 0.28 per cent, to 1,616.52 from Thursday’s close of 1,621.07. The benchmark index, which opened 0.37 of-a-point lower at 1,620.70, moved between 1,609.67 and 1,621.25 throughout the day. The broader market was negative, with decliners outpacing advancers 604 to 439. A total of 550 counters were unchanged, 1,151 untraded, and 18 suspended. Turnover declined to 3.17 billion units worth RM2.24 billion from 4.48 billion units worth RM2.75 billion yesterday. Rakuten Trade Sdn Bhd vice-presiden...
YTL Power's share price has taken a significant hit, sliding 20.49% in just one month and showing a continued downtrend over the past six months. The recent earnings report, which revealed an 18% YoY decline in core net profit to RM1.4 billion, has sparked concerns. However, despite these headwinds, local analysts from RHB and MIDF have maintained their Buy calls, underpinned by long-term growth prospects in data centres and renewable energy.
Key YTL Power Performances
Winners:
- Wessex Water: Benefited from a 12% tariff hike, aiding its earnings recovery.
- AI Data Centre Expansion: The 20MW AI-DC project in Kulai is on track for commercialization by July 2025 under a four-year offtake agreement, with no expected disruptions in AI chip supply.
Strugglers:
- PowerSeraya Unit: Saw a 28% drop in contribution due to lower pool and retail prices in Singapore.
- Telco Division: Losses widened 2.4 times to RM59.4 million, mainly from slower progress in the Point of Presence fibre optic project in Sabah.
Growth Drivers and Challenges
- Diversification into New Sectors: Expansion into data centres and renewable energy is expected to provide fresh revenue streams.
- Earnings Pressures: Slower-than-expected progress in the AI data centre development and ongoing challenges in the telco division are weighing on current profitability.
- Market Sentiment: Despite the earnings moderation, analyst optimism remains intact, highlighting the potential for a turnaround as strategic projects mature.
Company Highlights
- Financials: FY25 first-half results met expectations but reflected an 18% YoY decline in core net profit to RM1.4 billion.
- Analyst Ratings:
- RHB Research: Maintained a Buy call, adjusting the target price to RM4.53 from RM4.70, citing slower AI-DC progress.
- MIDF Research: Slightly revised its target price to RM5.61 from RM5.64 while upholding its positive outlook.
- Project Milestone: The upcoming commercialization of the 20MW AI data centre in Kulai remains a pivotal catalyst for future growth.
Industry Outlook
- Long-Term Potential: Analysts are optimistic that YTL Power's strategic pivot toward data centres and renewable energy will support a recovery in share price over time.
- Market Rebound: Despite near-term challenges, the firm’s diversification efforts could stabilize earnings and enhance market performance as these new segments mature.
Investment Calls
- Buy Recommendations: Both RHB and MIDF have retained their Buy calls, reflecting confidence in YTL Power’s long-term strategic direction.
- Focus Areas: Investors should closely monitor the progress of the AI data centre and renewable energy projects, which are expected to be key drivers of future growth.
Conclusion
While YTL Power faces short-term headwinds with a 20% stock decline and an 18% drop in net profit, its long-term prospects appear robust, driven by strategic expansion into high-growth areas. Investors are advised to adopt a selective approach, focusing on the company’s evolving projects that could signal an eventual recovery.
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