KUALA LUMPUR (May 23): YTL Power International Bhd's stock (KL:YTLPOWR) fell on Friday as investors reacted to a set of weaker-than-expected results. Parent company YTL Corporation Bhd (KL:YTL) also declined.

At least two research houses have downgraded YTL Power given a more cautious earnings outlook. The company’s results for the cumulative nine months ended March 31, 2025 (9MFY2025) accounted for only 71% of the consensus full-year estimate, after its key earnings driver, PowerSeraya, showed weaker-than-expected earnings, according to analysts in their notes.

CGS International and TA Securities have downgraded their ratings to 'hold', and lowered their earnings forecasts to reflect weaker volumes from the Singapore-based electricity producer.

CGS International cut its FY2025 profit after tax estimate by 3% to reflect weaker volumes at PowerSeraya.

The research house lowered its target price (TP) for YTL Power to RM3.75 after factoring in dilution from the bonus warrant, remaining cautious as the company continues to be selective in choosing offtakers for its data centre business amid ongoing concerns over the US' artificial intelligence (AI)-related diffusion rules.

Shares of YTL Power dropped as much as 19 sen or 5% to RM3.41 on Friday. YTL Corp, the single-largest shareholder which owns about 41% of YTL Power, was down nearly 7% at RM1.86.

Separately, TA Securities reduced its earnings forecasts by 6% for FY2025, 13% for FY2026, and 12% for FY2027.

"Our revised projections also factor in more conservative expectations for PowerSeraya given the potential impact of external trade uncertainties on the Singapore economy," TA Securities said, lowering its TP to RM4.02 from RM5.77 previously.

Hong Leong Investment Bank (HLIB) meanwhile expects the S$120 million (RM395.7 million) profit after tax and minority interest reported for the latest quarter from PowerSeraya to continue in future quarters.

A 600-megawatt (MW) combined cycle gas turbine (CCGT) is expected to commence operations by the end of 2028. Meanwhile, the planned 500MW large-scale solar (LSS) remains contingent on the take-up rate of YTL Power's Johor data centre.

HLIB maintained its 'buy' call with an unchanged TP of RM5.60, or RM4.16 after dilution from the bonus warrant, viewing YTL Power’s valuation as attractive, trading at a forward price-earnings of nine to 10 times.

Meanwhile, CIMB Securities said a key rerating catalyst for the stock will be timely take-off of its new AI data centre business.

The house noted that the company's total data centre capacity of 188MW has been fully taken up, with total contracted revenue for the business reaching US$2.5 billion (RM10.6 billion) over the contract duration.

The total 188MW capacity includes a 20MW AI data centre, with revenue expected to come in by late 1QFY2026.

The 80MW data centre will be leased in two phases by the end of 2025 and then the second quarter of 2026 to a tenant which also took the remaining 16MW in YTL Power’s first co-location data centre, where the initial 32MW was leased to Singapore-headquartered Sea Ltd.

Meanwhile, a separate 40MW data centre leased to a US hyperscaler is scheduled for completion between August and September 2025.

For the UK-based water and sewerage unit, Wessex Water, CIMB Securities expects quarter-on-quarter improvement in 4QFY2025, driven by additional water tariff increases permitted under the upcoming five-year regulatory period starting April 2025.

Therefore, the research house maintained its 'buy' rating, but lowered its TP to RM4 for YTL Power, factoring in dilution from the bonus warrant.

There are 14 research houses currently covering YTL Power, with 11 on 'buy', two on 'hold' and one on 'sell' recommendations. The average TP stands at RM4.54, according to Bloomberg, indicating a potential upside of up to 29.7% over the next 12 months based on the most recent price.

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