Update 2 July on YTL Power

The Dow Jones climbed up 400 points Tuesday as investors pivot away from tech stocks. The index rose to its highest levels in around five months. Equity markets were overall mixed, with declines in tech stocks keeping other major indexes under wraps. Health stocks are leading the charge higher on the Dow Jones, while tech giants including Nvidia and Tesla were struggling under the weight of their unique battles.

The Trump administration is inching toward finally passing its “big, beautiful budget bill” after weeks of political grappling over different sections of the rapidly changing government spending bill. However, one thing is certain to investors: Trump’s spend-heavy budget will be adding trillions of dollars of debt to the already heavily laden federal deficit for years to come.

Health sector stocks are catching a windfall as investors pull back from tech giants heading into the midweek. Ongoing trade and tariff uncertainty, political strife, and insider selling are all beginning to weigh on both hardware giant Nvidia and EV maker Tesla.

Tesla CEO Elon Musk, who until recently was President Trump’s right-hand hatchetman responsible for cutting federal workers and entire departments without congressional oversight, has crashed out of Trump’s inner circle. Musk has stepped up his antagonism of President Trump’s budget, and is threatening to fund the opponents of Republicans who support the bill.

On Nvidia’s investor radar is a growing list of insider stockholders who have been slowly releasing their shares this year, even as share prices reach meteoric highs. Nvidia insiders have released upwards of a billion dollars’ worth of Nvidia stock over the past year, prompting some Nvidia traders to wonder if the top on the AI craze is already priced in.

US ISM Manufacturing Purchasing Managers Index (PMI) figures for June came in stronger than expected on Tuesday, rising to 49.0 from last month’s 48.5. Despite the improvement, aggregated investor sentiment is still stuck in contraction territory as business operators continue to worry about growth prospects in the face of tumultuous trade and tariff conditions.

The Senate passed Trump’s signature policy bill

The New York Times, July 2, 2025

The Senate yesterday voted 51-50 to approve President Trump’s sweeping bill to slash taxes and social safety net programs. Republican Senators muscled through deep internal rifts in a bid to deliver Trump’s agenda, but the bill’s fate in the House of Representatives was uncertain.

Three Republicans joined every Democrat in voting against the measure, which Trump calls the “big, beautiful bill,” forcing Vice President JD Vance to cast the tiebreaking vote.

The vote came after a brutal slog of debating, voting and negotiating that lasted more than 24 hours. Republicans cut deals and haggled with skeptics until the very last moments. The legislative win presents a considerable risk to the party’s political future.

Details: The bill would extend roughly $3.8 trillion in tax cuts enacted during Trump’s first term in 2017 and provide tens of billions of dollars in new funding for border security and the military. Millions of low-income Americans could experience staggering financial losses through cuts to health insurance and other federal aid.

What’s next: The House of Representatives is expected to vote today on final approval before the bill is sent to Trump for his signature.

Donald Trump signs executive order lifting US sanctions on Syria

Euronews, July 1, 2025

US President Donald Trump signed an executive order late on Monday ending many economic sanctions on Syria. The order follows through on promises made to Syria’s interim President Ahmed al-Sharaa during their meeting in Riyadh in May.

White House Press Secretary Karoline Leavitt says the order is designed to “promote and support the country's path to stability and peace.”

The executive order is meant to “end the country’s isolation from the international financial system, setting the stage for global commerce and galvanizing investments from its neighbours in the region, as well as from the United States,” said Brad Smith, US Treasury’s acting undersecretary for terrorism and financial intelligence.

Washington granted Syria sweeping exemptions from sanctions in May, which was a first step towards fulfilling Trump’s pledge to lift the half-a-century old of penalties on a country shattered by 13 years of brutal civil war.

Along with the lifting of economic sanctions, Monday’s executive order lifts the national emergency outlined in an executive order issued by former Republican President George W. Bush.

Bush’s order was in response to Syria’s occupation of Lebanon and the pursuit of weapons of mass destruction and missile programs, Treasury officials said. Five other previous executive orders related to Syria were also lifted.

Monday’s order does not however revoke sanctions imposed on ousted former President Bashar al-Assad, his top aides, family members and officials who had been determined to have committed human rights abuses, been involved in drug trafficking or part of Syria’s chemical weapons programme.

It also leaves intact a major set of sanctions passed by Congress targeting anyone doing business with or offering support to Syria’s military, intelligence or other suspect institutions.

While the Trump administration has passed temporary waivers on those sanctions, known as the Caesar Act, they can only be permanently rescinded by law.

Sanctions targeting terrorist groups and manufacturers and sellers of the amphetamine-like stimulant Captagon, which al-Assad regime officials were widely accused of having benefited from its trade in the Middle East, will remain in place.

Trump met with al-Sharaa in the Saudi Arabian capital, Riyadh, in May as part of his three country tour of the Middle East. The 47th US president told his Syrian counterpart he would lift sanctions and explore normalising relations in a major policy shift between Washington and Damascus.

“This is another promise made and promise kept,” Leavitt said Monday.

Since Trump’s first announcement in Riyadh of removing sanctions on Syria, the European Union and United Kingdom have since followed suit. The EU has lifted nearly all of its remaining sanctions on Syria.

While Trump’s order is a major move for Damascus, carrying potentially major positive effects on its struggling economy, some restrictions still remain in place.

The US has still not removed its designation of Syria as a state-sponsor of terrorism. The group al-Sharaa led – Hayat Tahrir al-Sham (HTS) – is also still regarded as a foreign terror organisation. A State Department official says those designations are being reviewed.

Thailand’s prime minister was suspended

The New York Times, July 2, 2025

Thailand was plunged into fresh political turmoil yesterday after the Constitutional Court suspended Prime Minister Paetongtarn Shinawatra, less than a year after she took office.

A group of senators accused her of ethical lapses, which they said took place during a phone conversation last month with the Cambodian leader Hun Sen after a border skirmish in which a Cambodian soldier was killed. The court agreed to consider the complaint and suspended Paetongtarn with immediate effect. She said she accepted the court’s decision and that she would soon present her case.

Details: In the phone conversation with Hun Sen, which the Cambodian leader made public, Paetongtarn appeared to disparage her own country’s military. She called Hun Sen “uncle” and offered to “arrange” anything that he wanted.

Malaysia data centres battle higher power costs, unclear pricing

Reuters, July 1, 2025

KUALA LUMPUR (July 1): The operators of energy-hungry data centres in Malaysia are scrambling to reassess costs after steeper-than-expected power tariffs kicked in on Tuesday, industry players said, clouding prospects for the Southeast Asian hub of digital investments.

Competitive rates for electricity, which forms the bulk of operating costs, make Malaysia a magnet for data centres compared to land-scarce neighbour Singapore, luring billions of dollars in investment from companies like Microsoft and Google.

The tariff hike unveiled in December, with details fleshed out last month, could boost electricity costs by 10% to 14% before surcharges for major consumers such as data centres, an industry official and a government official said.

A key element of the uncertainty stems from the bands used to calculate power bills in the tiered pricing system, with industry players saying most major centres are expected to fall in the ultra-high voltage category with the highest tariffs.

With many in the industry unprepared for the scale of increases, some investors may now adopt a wait-and-watch approach, said Gary Goh, founder and director of data centre advisory firm Sprint DC Consulting.

"For a 100-megawatt (MW) facility, this could translate to an additional US$15 million (RM63.19 million) to US$20 million per year without considering fuel surcharge," he added.

The government plans to announce a fuel surcharge every month that reflects changes in fuel prices and foreign exchange. This month the surcharge stands at zero, state grid operator Tenaga Nasional Bhd (KL:TENAGA) said on its website on Tuesday.

Malaysia is set for the region's fastest surge in data centre power demand, tripling to 21% by 2027 from 7% in 2022, a joint report in May by consultancy Bain & Co and firms such as Google and Singapore's state-owned Temasek showed.

The new tariff structure means operators of big data centre operators will now account for a higher share of grid management costs than smaller peers, said Cheam Tat Inn, managing director of the Malaysian arm of US operator Equinix.

"If you are a large data centre, then you pay for a bigger share of the infrastructure or distribution network costs," Cheam said.

Equinix, with two data centres in Malaysia, was looking at various providers of alternative energy in anticipation of higher tariffs, Cheam said last month.

Tenaga declined to comment, directing queries to Malaysia's Energy Commission, which did not immediately respond to requests for comment. Prime Minister Datuk Seri Anwar Ibrahim has defended the increases as necessary to boost social spending.

Until now, Malaysia had used lower power prices and a stable power grid to lure investment in data centres.

But tariff hikes could drive investment towards neighbouring Vietnam and Thailand, said Mahadhir Aziz, president of the Data Centre Association of Malaysia, which groups firms such as Bridge, AirTrunk and DayOne, as well as Equinix.

"The government would have to look at this now, at least regionally," he added.

"Data centres or digital infrastructure business, while they may have invested in land and buildings here, can actually still reconsider their investments."

How will this electricity tariff hike benefit YTL Power?

The 14% increase in electricity tariffs from 1st July 2025 will add substantial costs to manufacturing factories, office towers, shopping malls and especially data centres which are run on 24/7.

A simple calculation will show that a 14% increase in electricity pricing, say an increase of 7.0 sen/kWh from average 50 sen/kWh, will result in additional electricity costs of:

100 MW x 8,760h x 7.0 sen/kWh = RM61.3 million a year for a 100MW data centre

before any fuel surcharge.

The increase in electricity tariffs will play into the advantage of YTL Power as its data centre park in Kulai is backed by 500MW of solar power farm at adjacent land. Solar panels are being installed now as YTL Power takes advantage of the depressed pricing of solar panels which has dropped by over 70% since 2024.

As we already know from previous LSS (Large Scale Solar) tenders, the winning bids were as low as 15.5 sen/kWh in the most recent round. As YTL Power bought the Kulai land at RM6.00 psf, which is much lower than other data centre developers’ land price but still higher than most solar power developers’ land costs. Hence, I expect that YTLP-SIPP JV could sell solar power from its Kulai solar farm to adjacent data centres at 20 sen/kWh or so for a decent return to the JV. That would be about 65% discount to the new electricity tariffs to data centres at other locations.

As I commented earlier, the much lower land cost of YTLP’s Kulai DC Park and the much lower electricity costs will be key advantages for YTL Power to attract big data centre players to lease from YTL Power Kulai DC Park. Furthermore, YTL Power now boosts the record of having completed a 20MW AI data centre using the most advanced Nvidia Blackwell GPUs, and YTL Power is a preferred neocloud partner of Nvidia, which means YTL Power has access to Nvidia’s latest AI chips.

Incidentally SemiAnalysis recently published a report that featured Oracle and how together with Bytedance it has made Johor the second largest AI hub in the world. SemiAnalysis believes that TikTok’s parent is one of the world’s largest and fast-growing users of GPUs, of comparable scale to US hyperscalers, and is Oracle’s largest GPU customer today.

Oracle and Bytedance have a few sizable deals in the US, notably in Northern Virgina, but what is more impressive is their ASEAN growth which led to the emergence of the world’s second largest AI data center hub in Singapore-Johor-Batam hub. It is believed that most of Oracle’s ASEAN GPU capacity is allocated to Bytedance.

Their largest “co-cluster” in Johor is set to reach 600-700MW within a year, and potentially up to 2GW by 2028.

Though Oracle has a couple of key APAC datacenter partners such as GDS International (which was rebranded as DayOne in January 2025), nothing stops Oracle from engaging YTL Power to build new AI data centres or leasing from YTL Power’s AI data centres. As Oracle / DayOne is negotiating power supply deals with Tenaga Nasional in light of the recent electricity tariff hikes, I am sure they will realise that YTL Green DC Park nearby actually offers much more competitive power solutions as well as adequate water supply for their data centres.

YTL Power still have some 300MW of spare data centre capacity at its Kulai DC Park. If Oracle / Bytedance really ramps up their plans for new data centres to 2GW by 2028, nothing will be faster than leasing 300MW from YTL Power while they look for land and suitable sites for the balance 1,000MW data centre expansion.

In any event, the rapid ramp up of data centres in Johor-Singapore by Oracle-Bytedance will create huge demands for fast, low-latency dark fibre connection between the data centres across Malaysia and Singapore. YTL Power will certainly benefit from such demand surge as it lays out dark fibres across Johor-Singapore and along the 1,600km of railway tracks in Peninsular Malaysia. YTL Power together with SIPP has the monopoly concession for dark fibre connectivity between Johor and Singapore.

On the other hand, EPF has exercised 106.8 million warrants of YTL Power on 25 June 2025, as announced to Bursa yesterday. That is almost 80% of all the warrants EPF was entitled to. EPF held about 700 million shares of YTL Power as of yesterday. EPF have also exercised over 100 million shares of YTL warrants.

The share price of YTL Power surged past the psychological level of RM4.00 yesterday on healthy volumes. It should be on track to reach the RM4.20-4.30 level which was the share price when the company announced the bonus warrants proposal in late January. The markets have well received the bonus warrants proposal which has almost achieved the purpose of raising fresh funds for the company for future expansion as well as rewarding long term shareholders of the company.

Those who have held onto YTL Power shares, received the free warrants and exercised the warrants at RM2.45 will have made a decent gain of RM1.60 per warrant or 40 sen per mother share held.

Say you had 5,000 shares of YTL Power at RM4.20 in late January when the company announced the bonus warrants proposal, you should have received 1,000 shares of free warrant. If you have exercised the warrant, then you will have 6,000 shares of YTL Power now:

Your cost: 5,000 x RM4.20 = RM21,000

Value of your shares now: 6,000 x RM4.05 = RM24,300

So you will have gained 15.7% in 5 months.

For other investors or funds who have added positions or bought in YTL Power shares in Feb-April 2025 when the share price was depressed due to dissatisfaction of certain shareholders on the non-tradeable nature of the warrants or fears of earnings dilution, the returns are even more impressive.

Say an investor bought in 5,000 shares of YTL Power at RM3.30 in early February when the company shares were sold down due to the emergence of DeepSeek and after the announcement of the bonus warrants proposal, or in early April when President Trump announced the reciprocal tariffs, the investor should have received 1,000 shares of the free warrant and made a bigger gain:

Cost: 5,000 x RM3.30 + 1,000 x RM2.45 = RM18,950

Value now: 6,000 x RM4.05 = RM24,300 so a gain of 28.2% in 3 to 5 months

That is exactly why I said before that this bonus warrants proposal was to reward long-term shareholders and investors with a long-term investment horizon such as EPF. Short term traders and weak holders have been flushed out in Feb-April, while YTL & YTL Power have seen the entry of more credible long-term investors and funds.

Another aspect of the bonus warrants proposal which I said was non-conventional but rather brilliant was the non-tradeable nature of the free warrants. Imagine that if the warrants were made tradeable like normal warrants, then most of the shareholders would sell away the warrants in the open market shortly after they receive the warrants, especially when the mother share price had gone up so much. The warrant would have been worth at least RM1.60 per warrant by now and most warrant holders would have sold them off. The issue then would be that the company would not get much fresh money from warrant exercise in this year, as most warrant holders tend to hold till the end of the third year then only consider exercising the warrants.

Now that the warrants are non-tradeable so they have no value until you exercise them. Most people will exercise the warrants almost immediately, partly to get the interim dividend and partly because some funds cannot hold non-tradeable securities.

I would imagine that YTL Power will be getting fresh funds of at least RM3.5 billion within 3 months from issuing the free warrants. That will be timely for YTL Power to pursue new opportunities in 2H 2025. I expect new deals to come in next 3 months.

Net short positions on YTL Power dropped by 660k shares to 22.2m shares at close Tuesday, while net short positions on YTL also dropped by about 600k shares to 18.6m shares.