The segment is expected to remain a major earnings contributor in the near-to-medium term, said TA Research.
PETALING JAYA: YTL Power International Bhd
(YTLP) could see gradual normalisation of earnings contribution from Power Seraya by financial years 2025 (FY25) to FY26 as retail electricity contracts with higher tariffs and favourable natural gas hedges gradually expire.
New capacity is expected to kick in from 2026. The segment is expected to remain a major earnings contributor in the near-to-medium term, said TA Research.
The group’s upcoming 600 megawatts hydrogen-ready combined cycle gas turbine power plant is expected to expand Seraya’s capacity by an estimated 20% once operational by December 2027.
TA Research said that with an estimated capital expenditure of S$800mil, a 21-year plant life and high-single digit pooled internal rate of return, the new plant could add about 20 sen per share to its sum-of-parts valuation.
The research house made no changes to its earnings forecasts after the release of YTLP’s first quarter FY25 financial results. But several research houses cut their earnings forecasts.
RHB Research trimmed its FY25 to FY27 earnings forecasts by 3%, 6% and 5% after imputing lower contributions from Wessex Water and slower progress in the artificial intelligence-data centre development.
Hong Leong Investment Bank (HLIB) Research adjusted earnings for FY25 to FY26 by minus 5.2% and minus 9.9% respectively, and introduced FY27 earnings at RM3.7bil.
Kenanga Research trimmed its FY25 to FY26 earnings forecasts by 9% and 6%, mainly to adjust for the group’s telco earnings assumptions as it expects it to be loss-making.
However, it kept its net dividend per share assumption unchanged at seven sen for both FY25 and FY26.
CGS International Research reiterated its “add” rating on the stock with a lower target price (TP) of RM4 a share, on the back of its earnings revisions and updated currency assumptions.
MIDF Research, in contrast, maintained its FY25 earnings forecast.
It had previously adjusted Power Seraya’s longer term earnings (FY27 and beyond) to reflect higher earnings before interest, taxes, depreciation and amortisation margin of close to S$60 per megawatt hour.
It is a sustainable long-term margin post-earnings normalisation, said MIDF.
Its TP is adjusted to RM5.64 a share from RM6.20. The research house continues to like YTLP for its strategic expansion into data centres and renewable energy (RE).
YTLP is a potential beneficiary of the strong RE growth trajectory under the National Energy Transition Roadmap, particularly for RE exports given its presence in the Singapore power sector, said the research house.
TA Research, HLIB Research and RHB Research maintained their “buy” calls on the stock with a TP of RM6.39, RM7 and RM4.70 a share, respectively, while Kenanga Research retained its “outperform” call with a TP of RM5 a share.
