YTL Power rises to become top gainer on bourse

PETALING JAYA: Foreign funds continue pouring into YTL Power International Bhd making it the top gainer among FBM KLCI-linked stocks on the local bourse this year.

In the year-to-date period, YTL Power’s shares had gained more than 44% at last Friday’s close and the gains have sustained amid some cautiousness from local investors who have been net sellers of the stock since the beginning of the year.

After an impressive 250% gain last year, the rally appears set to continue for the company, which has gradually seen a change in its growth profile as it is moved to tap revenue from new economic sectors such as green energy, green data centres and more recently, artificial intelligence (AI).

There seems to be no stopping its rise, at least for now even as recent moves have meant it is wanting to move away from the traditional utilities segment which is usually seen as a stable dividend yielding sector.

It is noteworthy that despite its rise, the stock is trading at competitive historical price-to-earnings ratio valuation of 11.3 times.

According to statistics by Dibots, YTL Power was the most net bought stock by foreign investors in the first trading week of the year with recorded net buying of RM110.2mil.

Conversely, YTL Power was among the most net sold stock among local institutional (RM22.7mil), retailers (RM41.2mil), nominees (RM41.9mil) and proprietary (RM4.4mil) investors for the same week.

Commenting on these, CIMB-KAF noted that sector-wise, foreign investors were the primary net buyers in the utilities and property sectors, while retail investors saw a contrasting trend as they were the largest net sellers in these two sectors.

The strong momentum keeps going for YTL Power, which derives most of its earnings from overseas such as the United Kingdom and Singapore.

A month ago, its widely reported partnership with US tech giant Nvidia Corp had excited investors as it was now also exposed to the strong growth prospects in AI.

For YTL Power, analysts said its outlook remains bright and valuations appear to be compelling despite its rise to recent price levels.

Its earnings remain on an upward trajectory with net profit in its first quarter ended Sept 30, 2023 rising by almost five times year-on-year (y-o-y) to RM847.9mil, while revenue rose by 15% y-o-y to RM5.45bil.

In its quarterly notes to its financial statements, YTL Power said its power generation business saw a better performance mainly due to better margins and the strengthening of the Singapore dollar against the ringgit.

In its report last month, RHB Research said it continues to have a long-term positive view on YTL Power’s collaboration with Nvidia.

It noted that the project may also boost its data centre take-up rate in Johor.

According to Kenanga Research, YTL Power’s collaboration with Nvidia will see it now being a “managed service provider” where it goes beyond providing a physical space and infrastructure to offer a range of managed services including software.

Kenanga Research has maintained its “outperform” rating on the stock with a target price of RM3.06, while RHB Research maintained its “buy” call with a target price of RM2.95.

RHB Research cited key risks to YTL Power include the execution risk for its Java and Jordan power plant projects and weaker contributions from the Wessex Water and PowerSeraya power plant.

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