YTL Power: A Comprehensive Analysis by Maybank Investment Bank Berhad

Date of Report: December 6, 2024

Broker: Maybank Investment Bank Berhad

Overview

YTL Power (YTLP MK) is making significant strides in the utilities sector, particularly with its data center initiatives. The company’s commendable progress in construction and strategic maneuvers in AI computing have been highlighted in the latest report by Maybank Investment Bank Berhad. With a “BUY” recommendation and a target price of MYR4.70, YTL Power stands out as a promising investment opportunity.

Data Center Developments

YTL Power’s Johor Data Center Park, located in Kulai on a 664-hectare site, is a focal point of its growth strategy. Initially operational since May 2024, the first phase (JDC 1) boasts an IT load of 48MW, expandable to 72MW, and has attracted an anchor tenant occupying 32MW. The report highlights the ongoing construction of phase 2 (JDC 2), which will support an additional 100MW for AI servers and co-location. The completion of JDC 2 and subsequent phases promises to augment YTLP’s capabilities in the data center sector.

AI Compute Business

The integration of AI computing services through YTL AI Cloud is a strategic move by YTL Power. The company is in the process of acquiring Nvidia’s AI GPUs to enhance its offering, underscoring its commitment to cutting-edge technology. The AI compute business is anticipated to contribute to revenue, potentially commencing in FY26E.

Financial Performance and Projections

YTL Power’s financial outlook remains robust. The report maintains earnings forecasts with expectations for Wessex recovery offsetting any tapering from PowerSeraya. The data center and AI segments are projected to contribute significantly to the company’s financials, with an estimated MYR0.47/share value. The current share price is MYR 3.77, with a 12-month price target set at MYR 4.70, indicating a 26% potential upside.

ESG and Risk Assessment

The report provides a detailed ESG analysis, rating YTLP at 58 out of 100 in its proprietary scoring methodology. Despite some exposure to coal-fired power plants, the company is actively investing in renewable energy initiatives, such as solar-powered data centers. The report also mentions YTLP’s proactive stance on waste management and conservation efforts.

Key Risks and Challenges

YTL Power faces several risks, including regulatory changes that could impact profitability and potential plant outages. The company’s exposure to currency risk due to its international operations is also noted. However, the strategic investments in data centers and AI are seen as mitigating factors.

Conclusion

In summary, YTL Power’s strategic focus on data centers and AI, coupled with steady financial performance and a strong ESG framework, positions it as a compelling investment opportunity. With a “BUY” recommendation from Maybank Investment Bank Berhad and a promising outlook, YTL Power is set to continue its growth trajectory in the utilities sector.