The power utility and infrastructure group fell as much as 11.3% or 61 sen to RM4.77 during the morning trading session.
However, it managed to pare some of its losses in the afternoon, and was trading at RM4.95 – 7.99% or 43 sen lower – at 4.05pm, valuing the group at RM40.62 billion. It was the seventh most actively traded stock on Bursa Malaysia, with about 76.9 million shares changing hands.
For Q3 FY2024, YTL Power recorded a 34.5% jump in net profit to RM698.69 million from RM519.64 million a year ago. The increase was driven primarily by its power generation and investment holding segment, where its data centre development business is parked.
However, revenue for the quarter dipped 3.7% to RM5.16 billion from RM5.36 billion a year earlier, it said in its bourse filing yesterday.
The stock has been on an absolute tear over the past year, surging 323% since May 24, 2023 when it was just RM1.17.
A majority of research houses are still bullish on YTL Power, which has been riding the data centre and artificial intelligence (AI) wave over the past year.
Its tie-up with US-based Nvidia Corp to build a green AI data centre in Johor has just added to the optimism. Since the announcement of this US$4.3 billion (RM20.3 billion) project in early December last year, YTL Power’s share price has doubled.
However, the tide seems to be turning with at least two research firms downgrading their calls from “buy” to “hold” as the group’s share price surge appears to be stalling.
Whether today’s sharp drop in its share price is just a blip or a return to the norm remains to be seen.
Downside risks
CGS International flagged some potential downside risks including execution setbacks and market risks associated with the data centre projects, as well as significant capital expenditure that could elevate gearing.
It also said the take-up rate for the data centre business needs to increase especially after the market has already factored in its over RM12 billion in value.
TA Securities said it is upbeat on YTL Power’s 500MW green data centre project in Johor but expects it to make losses in Q4 FY2024 due to depreciation expenses.
“Overall, we do not expect data centre contribution to be significant yet in the near-term but will be an important earnings driver once scaled up,” it said in a note today.
Meanwhile, Hong Leong Investment Bank believes the group will see stronger earnings over the next three financial years, driven by an expected turnaround in its UK-based wastewater management subsidiary Wessex Water, and contributions from its data centres.
“The group has a strong advantage as Nvidia’s preferred partner in Malaysia as an AI-Cloud service provider compared to other data centre owners, as it is difficult and costly to convert a conventional data centre to an AI-data centre infrastructure,” it added.
YTL Power is an international multi-utility owner and operator with operations, investments and projects in Malaysia, Singapore, the UK, Indonesia, Jordan and the Netherlands. Its key business segments are power generation, water and sewerage, telecommunications, digital technologies and investment holding activities.
The group’s parent company is YTL Corp, a conglomerate controlled by Francis Yeoh and his siblings.