KUALA LUMPUR: RHB Investment Bank Bhd (RHB Research) has trimmed YTL Power International Bhd's target share price and financial year 2025-2027 (FY25-FY27) earnings forecast due to the stronger ringgit.
It cut profit estimates by five to six per cent for FY25-FY27.
RHB Research cut YTL Power's target price to RM5.68 from RM5.94 a share.
This revision follows the stronger ringgit against several currencies, with PowerSeraya and Wessex Water being largely denominated in foreign currencies.
"This includes the rising exposure in US dollar upon the commercialisation of the artificial intelligence-data centre (AI-DC). "We remain positive over YTL Power's long-term earnings potential from its AI-DC development amidst an undemanding valuation," the firm said in a note today.
Meanwhile, RHB Research highlighted that PowerSeraya and Wessex Water contributed 68 per cent and 23 per cent, respectively, to total revenue in FY24.
Both businesses generate revenue in Singapore dollars and British pounds (GBP).
Looking ahead, the firm expects these two businesses to continue driving a significant portion of YTL Power's topline, with increasing revenue exposure to the US dollar once AI-DC revenue is recognised.
PowerSeraya's gas feedstock, a major cost component, is denominated in US dollars, while most of Wessex Water's costs are in GBP.
"Furthermore, the associate profit from the Jordan and Indonesia power plant projects as well as interest income arising from shareholder loans to its Jordan associate are also denominated in US dollar. "Additionally, colocation services revenue will be either in ringgit and US dollar depending on clients but cost is largely denominated in ringgit. "AI-DC's revenue and cost are likely to be denominated in US dollar," it added.
Overall, RHB Research has maintained a "Buy" call on YTL Power, with a lower target price of RM5.68 from RM5.94 previously.
The firm also applied a two per cent environmental, social and governance (ESG) discount based on its 2.9 ESG score.
It said downside risks for the group include weaker-than-expected plant performance and higher-than-expected operating costs.
YTL Power was trading 1.4 per cent higher at RM3.62 a share earlier.