Ranhill Utilities reported a net profit of RM23.6m in 3QFY24, which brought its 9MFY24 bottom line to RM39.1m, an improvement of +17.0%yoy, attributable to higher demand for electricity and lower maintenance cost from the group's power division. MIDF Investment Bank said the core earnings were within estimates, making up 71.1% of its full-year estimate but missed consensus at 65.5%.

Group revenue rose +1.7%yoy to RM1.75b in 9MFY24, attributable to stronger recognition of water revenue by Ranhill SAJ on
the back of the domestic water tariff hike in Feb-24. Despite that, the water segment PAT declined -17.8%yoy during the period due to higher amortisation on services concession assets, being the first year of operating period 6 (OP6). Meanwhile, the group's power segment grew +11.1%yoy to RM91.0m during the quarter, mainly from higher demand for energy from Sabah Electricity and higher energy payment fuel of gas and diesel due to a 10-day gas curtailment compared to 8 days in the
same quarter last year in Ranhill Sabah Energy II Sdn Bhd.

Ranhill SAJ will continue to contribute strongly to the group's earnings in the coming quarters due to the domestic water tariff hike, on top of stronger demand from the nondomestic consumers mainly due to the growth of data centres in Johor and the upcoming economic growth prospects from the Johor-Singapore SEZ and Special Financial Zone.

The group also indicated its interest in participating in the recently announced Corporate Renewable Energy Supply Scheme (CRESS) that will allow RE power producers such as Ranhill to sell electricity through the grid via a third-party access (TPA).
Change in FYE. The group's financial year end to be changed from 31st December to 30th June, in order for it to be coterminous with the holding company YTL Power International. The next set of financial statements will be made over a period of 18 months from Jan-24 to Jun-25.

The investment house is maintaining its earnings estimate forecast adding that the results were within expectations. MIDF recommends its SELL call and TP of RM1.07. While the entry of a strong controlling shareholder in YTL Power is one that could yield synergistic benefits due to its expertise in the water sector, the investment house views that the strong run-up in Ranhill's share price since Apr-24 values it at a stretched 29.8x FY25F PER as compared to a historical mean of 20x and a compressed dividend yield of only 2.4%. The house believes this presents an opportunity for investors to take profit