PETALING JAYA: The demand growth for electricity could remain elevated in 2025 as more data centres become operational.
Maybank Investment Bank (Maybank IB) Research said this but noted that the power sector is generally insulated from demand risk under the incentive-based regulation or IBR framework, and thus does not materially benefit from demand upside in the near term.
“Also based on channel checks, we note project returns for new domestic generation projects are increasingly less lucrative.
“Nevertheless, given the multi-year lead time to commission greenfield projects, the mismatch between earnings expectations and actual delivery might not manifest until some years down the road,” it said in a report.
It said for the gas sector, there are no material regulatory events pending in 2025.
“We expect the Malaysia Reference Price (MRP) to continue trending down into the second quarter of 2025 based on current crude oil price trends.”
Maybank IB Research said its preferred pick for the sector is YTL Power Bhd.
“We expect tapering of PowerSeraya’s earnings to be offset by recovering Wessex’s earnings (from improved regulatory terms, to be announced in December 2024 and tapering UK inflation).
“We note possible earnings uplift from its artificial intelligence (AI) compute segment if monetisation challenges do not crop up (the announcement of its first major AI compute customer could serve as a re-rating catalyst).”
Maybank IB Research said it also had a “buy” rating on Mega First Corp Bhd
.
“We do not rule out the revised Concession Agreement and Power Purchase Agreement for Don Sahong (incorporating the fifth turbine) being incrementally positive to Mega First.
“We also expect further progress and developments on its modern farming and hospital ventures.”
In terms of risks for Tenaga Nasional Bhd, Petronas Gas Bhd and Gas Malaysia Bhd, any changes to regulatory terms would have direct earnings implications.
YTL Power’s earnings are largely overseas-derived (with Wessex in the United Kingdom being the main earnings contributor) and are thus vulnerable to currency fluctuations, it said.
For Malakoff Corp Bhd, any major unscheduled plant outages could potentially lead to missed capacity payments, resulting in lower profitability.
Meanwhile, Mega First’s investment thesis centres on its ability to optimally recycle capital, thus any non-accretive or non-complementary investments could adversely affect sentiment, it added.
