YTL Power International Bhd has seen its shares decline recently, with a notable drop of up to 11.3% during a trading session. The stock’s dip came despite strong third-quarter financial results showing a 34.5% year-on-year increase in net profit to RM698.69 million, supported by its power generation and investment holding segments. Revenue, however, fell slightly by 3.7%, which may have contributed to investor concerns.
Furthermore, just in September, YTL Power International’s stock has faced a sharp decline of over 7%, attributed to an investigation by the Malaysian Anti-Corruption Commission (MACC) into its subsidiary, YTL Communications. The probe is focused on the 1BestariNet project, which was initiated in 2011 to provide internet connectivity and an integrated learning platform for Malaysian schools. The project, valued at over RM2.7 billion, was completed in 2019.
The MACC is investigating claims of false submissions and potential irregularities in project payments under the MACC Act 2009. In connection with this, YTL Communications’ office in Kuala Lumpur was recently raided, and documents were seized. Despite these developments, YTL Power has defended its subsidiary, emphasizing that the project was awarded through an open tender and was certified as successfully completed by the Ministry of Education.
The negative investor sentiment surrounding these allegations and the ongoing probe has contributed significantly to the drop in YTL Power’s share price. The company has assured full cooperation with the authorities to resolve the matter.
Reasons Behind the Decline:
- Valuation Adjustments: Following a significant rally earlier this year, YTL Power’s stock price correction reflects profit-taking activities. The company’s share price had surged over 300% in the past year, prompting some analysts to revise their calls from “buy” to “hold”.
- Market Concerns: Analysts have highlighted potential risks, including execution challenges and market uncertainties related to YTL Power’s ambitious AI-driven data center projects. Additionally, the group’s significant capital expenditure is raising concerns about its financial gearing.
- Global Market Sentiments: Broader market conditions, including geopolitical and economic uncertainties, may also weigh on investor confidence, contributing to the decline in YTL Power’s stock.
Positive Outlook:
Despite the recent downturn, analysts remain optimistic about YTL Power’s long-term potential. The company is poised for growth through its data center operations in Malaysia and Singapore, which align with the increasing global demand for AI and cloud computing infrastructure. Analysts expect stronger earnings contributions from its UK-based subsidiary, Wessex Water, and continued growth in power generation.
Analyst Recommendations
The stock still holds a favorable consensus among analysts, with 10 “buy” ratings and a 12-month target price of RM6, suggesting a potential upside of over 21.5% from current levels.
While the stock’s short-term performance reflects market adjustments, its robust fundamentals and strategic investments in high-demand sectors position it well for recovery and long-term gains.
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