YTL Power's Price Plummets 11% Following Earnings Results: What the Analysts are Saying
Shares of $YTL(4677.MY$ and its related stocks halted their successive days of gains on Friday, even after reporting an increase in earnings for Q3FY2024 (quarter ended March 31, 2024).
On Friday, YTL Corp's stock plummeted by as much as 9% during intraday trading, with the share price closing down 5.15% at RM3.680, while $YTLPOWR(6742.MY$ experienced an intraday decline of up to 11.3%, with its share price tumbling 7.99% to close at RM4.950. Similarly, $MCEMENT(3794.MY$ observed an intraday downturn of as much as 1.9%, with its share price falling 0.93% to RM5.300.
The drop in YTL Group's stock price, despite its highly anticipated earnings performance, has caught the attention of investors who are questioning the reason behind such a significant decline. Despite the majority of institutional analysts holding an optimistic outlook on YTL Power, particularly its data centre business, at least two institutional analysts have downgraded their calls from "buy" to "hold" following a significant surge in the share price, which has seen it gain over 300% in the past year.
Financial Highlights of YTL Groups
YTL Group's financial performance has been robust, as evidenced by the latest financial results released on May 23. YTL Corporation nearly reached RM 500 million in profit, and YTL Power's net profit was up by 34%. The group's chairman, Tan Sri Francis Yeoh, highlighted the strong contributions from the group's diverse business segments, which have collectively led to a noteworthy increase in net profit.
YTL's overall business profitability, despite a slight dip in revenue due to reduced construction sector contributions, did not hinder its earnings growth. Improved profit margins across several segments, combined with a successful pivot from losses to profits in property investment, development, and management services, propelled positive earnings. The cement, building materials, hotels, and utilities divisions maintained their growth trajectories.
YTL Power achieved a substantial net profit growth in Q3FY2024, benefiting from improved investment holding activities and increased profit margins. Malayan Cement and YTL REIT also reported impressive growth in their net profits, driven by stable prices, operational efficiency, and an uptick in revenue.
Mixed Analyst Insights
Despite impressive earnings performances, some analysts have downgraded their ratings on YTL Power due to concerns over the stock's significant price appreciation and the nascent stage of the data center business.
CGS International downgraded its rating on YTL Corporation to "hold," citing the need for a higher take-up rate in the group's data centre business and highlighting potential risks, such as execution and market risks, as well as significant capital expenditure that could affect gearing. However, CGS International forecast an improvement in Ebitda margin for FY2027 once the data centres are fully operational.
Kenanga is optimistic about the long-term growth potential driven by YTL Group's data center and digital banking operations. However, the institution believes that, following the stock's strong rally, its valuation is now fair. Consequently, Kenanga downgrades the stock to MARKET PERFORM from OUTPERFORM. Risks suggested include:
(i) stringent ESG standards in developed markets,
(ii) regulatory risks in Singapore's electricity industry, and
(iii) new data center ventures not taking off immediately.
Maybank Investment Bank provided insights into YTL Power's AI exposure, noting that while the market is optimistic, the company's plans are adaptable and demand-driven. This cautious optimism from Maybank suggests that the company's AI strategy may change according to market needs.
However, some analysts remain optimistic about the prospects of YTL Group.
Moving forward, according to Hong Leong Investment Bank, the YTL group is expected to achieve stronger earnings over the next three financial years, driven by an anticipated turnaround in its UK-based wastewater management subsidiary Wessex Water, as well as contributions from its data centers. "The group has an advantage as Nvidia's preferred partner in Malaysia for AI-Cloud service provider compared to other data center owners, as converting a conventional data center to an AI-data center infrastructure is difficult and costly," Hong Leong Investment Bank noted.
MIDF is also bullish on YTL's prospects. "We continue to like YTL as a beneficiary of the infrastructure upcycle, as well as the strategic venture into data centers and renewable energy through its utilities division."
Mooers, what is your opinion on the performance of YTL Group's stock price going forward? Please share your insights.
Source: Bloomberg, The Edge Malaysia, moomoo
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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104648403 : GG. most analyst gave bad reviews.
PokaiTrader : Their fundamentals are a nice narrative but lots of promises, may go sideways or even south. Little proven, but lots of potentials. Will remain a company that rewards insiders more than small shareholders in the long run. Subject to speculative swings especially when insiders want to cash out, perhaps this recent drop is some ESOS cashing out suddenly.
101660875 104648403 : Bad reviews? " Hold", " Market Perform" mean bad? Better improve your English reading skills...
104648403 101660875 : it's nothing to with English competency, it's depends on how you interpret it. Don't have to personal attack if the comments doesn't fit your interest, let's see how is the price trends in coming weeks.
zee_zee : wow
103972901 小猪 : Xiaobian, you made a mistake. Malaysia is the Malaysian currency, not the rupee; the rupee is the Indonesian dollar
On Paris : Good morning
102506778 : no worry.. hold on . need to be patient
Sky68 : the co in the right track, hold on. u will be rewrded
James Kiet Kiet : I personally think the market reacted too much, and they only released the third quarter earnings report. If the fourth quarter financial report suddenly becomes better, then it is your loss. None of the company's leaders were afraid, so hurry up first.
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