YTLPOWR: Lower Singapore Tariffs and Mobile Broadband Losses Weigh on Performance, Analysts Maintain Buy Call

A recent investment bank research report highlights a significant dip in a major utility provider’s net profit for the first half of FY26, attributing the decline primarily to lower tariffs in Singapore and expanded losses within its mobile broadband operations. The company’s core net profit fell short of both internal forecasts and market consensus, missing by 18% and 22% respectively. Net profit for the period decreased by 24.3% year-on-year to RM937.1 million.

Performance Review

The weaker performance was largely driven by its Singapore-based YTLP Seraya unit, which experienced a more than 15% year-on-year drop in tariffs during 1HFY26. This was a consequence of intense competition among retailers and elevated gas costs that eroded profit margins. The Energy Market Authority of Singapore reported that the Uniformed Singapore Energy Price (USEP) also saw a 9.1% slide from S$128/MWh in 1HFY25 to S$116/MWh in 1HFY26, further impacting the company’s energy sales.

Concurrently, the mobile broadband division reported higher-than-expected losses, with lower billings attributed to the near completion of a fibre project in Sabah.

Despite these headwinds, the company’s water and sewerage division, which includes Wessex Water and Ranhill, delivered a strong performance. Pre-tax profit for this segment more than doubled to RM406.1 million in 1HFY26, buoyed by increased tariffs and reduced interest expenses. Progress in the data centre operations was also noted, though pre-tax profit from this segment remained below RM100 million in 1HFY26.

Future Outlook and Investment Rating

Analysts maintain a “BUY” recommendation for the company, albeit with a revised target price of RM3.37 per share, down from a previous RM4.11. This valuation is based on a CY26F fully diluted price-to-earnings (PE) ratio of 15x, which represents one standard deviation above its five-year average of 12x. The premium applied reflects expectations for recurrent and resilient long-term earnings, primarily underpinned by the growth of its data centre operations.

The investment bank believes that the current share price, which has fallen 34.2% from its peak, already discounts the recent negative developments. Key catalysts for future share price appreciation include the potential award of a new gas power plant in Malaysia and stronger-than-expected earnings from both the data centre unit and YTLP Seraya. Risks to the outlook include continued lower energy tariffs in Singapore, potential import restrictions on Nvidia chips for the AI data centre in Johor, high operational costs at data centres, and ongoing losses at Wessex Water.