Ranhill Utilitites poised for more jobs, upside expected

Ranhill Utilities Bhd share price rebounded to close at RM1.39 on Nov 28 having lost some ground after hitting a high of RM1.44 in mid-Nov to a low of RM1.30 on Nov 22.

Ranhill reported a 59% year-on-year rise in net earnings to RM16.3 million in 3QFY24 while revenue rose to RM628.2 million from RM609.4 million. For the nine months just ended, net profit was slightly lower at RM33.2 million versus RM33.4 million a year ago. This was on the back of a flattish revenue of RM1.7 billion.

Its water segment saw higher revenue of RM1.01 billion year-to-date versus RM891.6 million a year ago. The higher revenue was mainly due to higher recognition of water revenue contributed by Ranhill SAJ Sdn Bhd.

However, its YTD net profit was lower at RM39.9 million versus RM48.6 million a year ago due to the higher recognition of amortisation on services concession assets by RanhillSAJ as it is 1st year of operating period

Meanwhile, its power segment recorded a higher YTD revenue of RM217.3 million compared with RM214.5 million in 2023, mainly due to higher demand from Sabah Energy. The company also saw higher energy payment fuel of gas and diesel as there is 10-days of gas curtailment compares to 8-days gas curtailment in preceding year in Ranhill Sabah Energy II Sdn Bhd.

It registered a net of RM3.2 million YTD versus RM1.6 million a year ago, an increase of RM1.6 million mainly due to higher energy payment revenue of solar plant, which commenced operation from February 2024.

According to consensus estimates, the company is projected to record net earnings of RM41.4 million for FY Dec 2024 and RM55.3 million for FY Dec 2025. In terms of valuations, this translates to forward PERs of 43.5x for this year and 32.6x for next year.

Recently, Ranhill Utilies, which is 53.2%-owned by YTL Power International Bhd, scrapped plans to jointly pursue a public-private partnership project with China Energy International Group Co Ltd for the proposed development of a regional drinking water supply facility project in Indonesia. This follows the expiry of a memorandum of understanding on Oct 29.

But more potential jobs are coming Ranhill Utilities’ way following the federal government’s commitment to spend more on water infrastructure, principally to address the long-standing problem of excessive non-revenue water (NRW) loss.

With higher government spending on water infrastructure, and data centre demand for water especially in Johor and Selangor.