Maybank Investment Bank Berhad
Date of Report: May 23, 2025
YTL Power’s Earnings Taper: Opportunities Amid Short-Term Weakness
Introduction: Navigating YTL Power’s Post-Rally Outlook
YTL Power (YTLP MK) has recently reported its 3QFY25 results, revealing a more pronounced softening in its PowerSeraya unit’s earnings than anticipated. Despite this, Maybank Investment Bank Berhad maintains a BUY recommendation, albeit with a revised lower target price, citing favorable valuations and significant catalysts on the horizon. This article dives into the details of YTL Power’s segmental performance, revised outlook, and the company’s evolving strategies, providing a comprehensive view for investors and market watchers.
Key Investment Highlights
- BUY rating maintained with a new target price (TP) of MYR4.20 (down from MYR4.70).
- 3QFY25 core net profit missed expectations, mainly due to steeper-than-expected earnings taper at PowerSeraya.
- Positive catalysts remain: Wessex’s medium-term recovery and progress in the data center/AI compute business.
- Dividend per share (DPS) increased to 4 sen for the quarter, up from 3 sen in the previous year’s comparable quarter.
3QFY25 Results: Sequential Weakness but Long-Term Promise
YTLP reported a 3QFY25 core net profit of MYR489 million, a 27% year-on-year and 25% quarter-on-quarter decline. For the nine-month period, core net profit stood at MYR1,881 million, representing 62% of Maybank’s and 66% of consensus full-year forecasts.
- Main drag: Sharper than expected earnings decline at PowerSeraya due to lower selling prices.
- Water segment: Lower QoQ pre-tax profit driven by software and receivables impairments. However, expectations are for a stronger 4QFY25 as Wessex benefits from higher tariffs.
- Mobile segment: Losses narrowed due to higher construction billings from the Sabah point of presence project.
- Investment holding: Pre-tax profit rose sequentially, bolstered by associate/JV contributions.
Segmental Performance: Detailed Breakdown
Revenue and Profitability by Segment (3QFY25)
| Segment |
Revenue (MYR m) |
YoY Change (%) |
QoQ Change (%) |
Pre-tax Profit (MYR m) |
YoY Change (%) |
QoQ Change (%) |
Pre-tax Margin (%) |
| Power Generation |
2,634 |
-26.3 |
-19.7 |
511.2 |
-39.3 |
-30.0 |
19.4 |
| Water & Sewerage |
1,647 |
33.2 |
0.5 |
32.6 |
N/A |
-45.9 |
2.0 |
| Telecommunications |
264 |
173.1 |
15.3 |
-41.4 |
-66.3 |
-30.2 |
-15.7 |
- Power generation remains the largest revenue contributor but faces significant margin compression.
- Water & Sewerage segment turns positive in pre-tax profit, with improvements expected as tariffs rise.
- Telecommunications still loss-making, though losses are narrowing.
Group Financial Summary
| MYR million |
FY23A |
FY24A |
FY25E |
FY26E |
FY27E |
| Revenue |
21,893 |
22,321 |
21,403 |
21,648 |
21,969 |
| EBITDA |
4,847 |
6,604 |
5,517 |
5,524 |
5,595 |
| Core Net Profit |
1,918 |
3,180 |
2,491 |
2,454 |
2,391 |
| Core EPS (sen) |
23.7 |
39.2 |
30.4 |
29.9 |
29.2 |
| Net DPS (sen) |
6.0 |
7.0 |
7.0 |
7.0 |
7.0 |
| ROAE (%) |
13.0 |
18.8 |
11.8 |
10.7 |
9.6 |
| Net Dividend Yield (%) |
4.6 |
1.5 |
1.9 |
1.9 |
1.9 |
| Net Gearing (%) |
129.1 |
117.1 |
106.9 |
100.9 |
96.0 |
Revision of Earnings and Target Price
YTLP’s forward forecasts have been trimmed to reflect the latest earnings run-rates at PowerSeraya and Wessex. Net profit estimates for FY25/26/27 have been cut by 17%/20%/15%, respectively, resulting in a reduced sum-of-parts-based target price of MYR4.20.
- PowerSeraya’s revenue growth is now forecast at -7% (FY25E), -3% (FY26E), and 0% (FY27E), with margins expected to stabilize at lower levels.
- Wessex’s revenue growth is expected to accelerate as tariff hikes feed through, with PBT margins rising accordingly.
- The data center segment continues to see positive momentum, though planned expansion (Phase 2, 80MW at DC2) has shifted towards colocation rather than AI compute. The first 20MW of AI compute is projected to be operational in 3Q25, contributing to FY26 earnings.
Sum-of-Parts Valuation: Segment Contributions
| Business Segment |
Equity Value (MYR m) |
Stake (%) |
Attributed Value (MYR m) |
Value per Share (MYR) |
TP Contribution (%) |
| Power Seraya |
13,164 |
100 |
13,164 |
1.61 |
38 |
| Wessex |
13,374 |
100 |
13,374 |
1.63 |
39 |
| Mobile |
263 |
60 |
158 |
0.02 |
0 |
| Jawa Power |
5,088 |
20 |
1,018 |
0.12 |
3 |
| Data Centre |
5,440 |
70 |
3,808 |
0.46 |
11 |
| Attarat Power |
8,193 |
45 |
3,687 |
0.45 |
11 |
| Residual Net Cash |
-754 |
– |
-754 |
-0.09 |
-2 |
| Total Equity Value |
|
34,454 |
4.20 |
100 |
Financial Ratios and Performance Metrics
- Core P/E (FY25E): 11.8x
- P/BV (FY25E): 1.3x
- Net Debt/EBITDA (FY25E): 6.2x
- Dividend Yield (FY25E): 1.9%
- ROAE (FY25E): 11.8%
- Capex/Revenue (FY25E): 18.0%
Risk Factors to Monitor
- Profitability is sensitive to regulatory changes, particularly regarding rates of return.
- Operational risks include potential plant outages.
- Majority of assets are located outside Malaysia, exposing YTL Power to foreign exchange volatility.
Company Overview and Shareholder Structure
YTL Power owns and operates a diversified portfolio of utility concessions across six countries, with activities spanning power generation, water and sewerage, telecommunications, and new ventures in data centers and AI compute.
- Major Shareholders:
- YTL Corp Bhd – 54.4%
- Yeoh Tiong Lay & Sons Holdings – 9.8%
- Employees Provident Fund – 6.9%
- Market Capitalisation: MYR29.8 billion (USD7.0 billion)
- Issued Shares: 8,290 million
- 52-week high/low: MYR5.38 / MYR2.90
Conclusion: Long-Term Value Remains Despite Near-Term Volatility
While YTL Power’s 3QFY25 results fell short due to a sharper-than-expected earnings drop at PowerSeraya, the company’s diversified asset base, ongoing tariff increases at Wessex, and the strategic pivot towards data center and AI infrastructure projects underpin a constructive long-term view. Investors should monitor execution risks and regulatory developments, but at current levels, YTL Power offers an attractive risk-reward profile for those seeking exposure to the evolving Southeast Asian utilities and infrastructure growth story.
Contact and Further Information
For more detailed financial and segmental data, refer to Maybank Investment Bank’s latest research contacts and reach out to their equity research team for in-depth coverage.
