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06 May 2024

STOCK NAME : RANHILL (5272)

RANHILL UTILITIES BERHAD, are a Malaysian conglomerate with interests in power and environment sectors. In the power sector, they develop, own and operate power generation assets. In the environment sector, we provide water supply services, operate water and wastewater treatment plants, and provide specialised services in the management and optimisation of water utility assets.

BUSINESS :

• Treated Water Supply Services
• Water and Wastewater Treatment & Reclaimed Water Treatment
• Non-Revenue Water Management
• Energy and Renewable Energy
• Multi-Disciplinary EPCM, PMC and O&M Services Consultancy Services

Ranhill’s Environment sector provides source to tap solution for the abstraction and treatment and supply of raw potable water in Malaysia and a provider of water, wastewater and reclaimed water treatment technologies with a strong presence in Thailand and China.

Subsidiaries :-

A subsidiary of the Ranhill Group, Ranhill SAJ is an integrated water supply company incorporated in the process of water treatment, distribution and management.

Accorded with an exclusive license by Malaysia’s Ministry of Energy, Green Technology and Water, we have completely integrated the cycle of potable water supply services from the raw source to treatment, all the way to management, maintenance and billing.

Ranhill SAJ Sdn Bhd  

Manages the whole water network in Johor and manages raw water abstraction, treatment, distribution, and sale as the sole operator for the state. It runs 46 water treatment facilities (WTPs) state-wide, with a total treatment capacity of 2,133 million litres daily (MLD).

Ranhill Water Technologies (Hong Kong) Ltd.

Ranhill Water Hong Kong (“RWHK”) owns 12 industrial wastewater treatment plants with a total design capacity of 227 MLD.

Ranhill Water Technologies (Thai) Ltd.

And AnuRAK Water Treatment Facilities Co. Ltd.

Ranhill Water Technologies (Thai) Ltd. (“RWTT”) and AnuRAK Water Treatment Facilities Co. Ltd. (“AnuRAK”) undertakes water, wastewater and reclaimed water treatment assets, as well as operations and project maintenance of related assets. Most assets are operated based on a Build-Operate-Transfer (“BOT”) and Rehabilitate-Own-Transfer (“ROT”) contracts.

Ranhill's Energy sector consists of the development, ownership, operation and maintenance of Combined Cycle Gas Turbine (“CCGT”) power plants and a large scale solar farm ("LSS4")

1. Ranhill Power Division

Ranhill, via its subsidiary, Ranhill Energy sector is a primary independent energy producer in Sabah. It has two 190MW Combined Cycle Gas Turbine (CCGT) plants in Sabah – Teluk Salut Power Plant, Ranhill Sabah Energy I Sdn Bhd, (formerly known as Ranhill Powertron Sdn Bhd) and Rugading Power Plant, Ranhill Sabah Energy II Sdn Bhd (formerly known as Ranhill Powertron II Sdn Bhd).

Ranhill Sabah Energy III 100MW CCGT, the latest addition to the Ranhill Energy's portfolio, further solidifies its position as a leading independent energy producer in Sabah, contributing to the region's sustainable energy future.

The plants produce 480 MW and serve up to more than 40% of the total installed capacity of Independent Power Producers (“IPP”) in Sabah. Ranhill is now the biggest IPP player in Sabah.

2. Ranhill Solar I Sdn Bhd

Ranhill Solar I Sdn Bhd owns a 50 MW greenfield solar photovoltaic plant in Bidor, Perak – the first Large Scale Solar (“LSS”) plant for solar power generation. This solar plant enables Ranhill Bersekutu Sdn Bhd to build its capability to undertake Engineering, Procurement, Construction and Commissioning ("EPCC").

Ranhill's Engineering Services sector consists of Engineering, Procurement and Construction Management (“EPCM”), Engineering, Procurement, Construction and Commissioning (“EPCC”), Project Management Consultancy (“PMC”), as well as operation and maintenance services for a wide range of infrastructure across multiple industries.

Subsidiaries :-

1. Ranhill Technologies Sdn Bhd (formerly known as Ranhill Water Services Sdn Bhd)

2. Ranhill Bersekutu Sdn Bhd

3. Ranhill Worley Sdn Bhd

4. Ranhill Power Division

LATEST CORPORATE ANNOUNCEMENT

- Ranhill Utilities Bhd has declared a share dividend distribution on a basis of 0.5 share for every 100 shares held in the utility group.

- Ranhill Utilities Bhd will cooperate with the Malaysian Anti-Corruption Commission (MACC) throughout an investigation involving its employees, it said on Friday.

- Ranhill Utilities Bhd has announced the renewal of its licence by the National Water Services Commission (SPAN) to treat and supply water to consumers in Johor for the next three years. The group disclosed that its subsidiary, Ranhill SAJ Sdn Bhd, received a letter from SPAN on Jan 10, notifying it of the renewal for the sixth operation licence. The renewed licence, issued under the Water Services Industry Act 2006 (Act 655), is effective from Jan 1, 2024 to Dec 31, 2026.

- Ranhill Utilities Bhd has accepted a letter of acceptance of tender worth RM283.89mil for the non-revenue water (NRW) reduction contract in Johor.

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KIM'S TARGET PRICE

Current Price : RM1.19

IMD TP : RM1.30

TP1 : RM1.50

TP2 : RM2.40 (Fair Value)

WARRANT :

RANHILL-CG : 0.045 sen

RANHILL CHART

Ranhill Utilities Berhad shareholders will have a reason to smile, with the analysts making substantial upgrades to this year's forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals.

Following this upgrade, Ranhill Utilities Berhad's four analysts are forecasting 2024 revenues to be RM2.3b, approximately in line with the last 12 months. Statutory earnings per share are anticipated to decrease 6.4% to RM0.042 in the same period. Previously, the analysts had been modelling revenues of RM2.1b and earnings per share (EPS) of RM0.038 in 2024. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.

1) Johor's Water Tariff Adjustment: A Boost for Ranhill and Infrastructure Development

The recent water tariff increase in Johor, announced by the Government and SPAN after 9 years without adjustment, is welcome news for Ranhill's water operations. This move aims to boost investment in upgrading the state's water infrastructure to meet rising demand. The introduction of the new Tariff Setting Mechanism (TSM) with its 3-year review cycle ensures water tariffs keep pace with inflation, aligning with ongoing regulatory reform efforts. Overall, this adjustment is expected to enhance Ranhill’s earnings for FY24 and beyond.

Moreover, the tariff adjustment enables Ranhill to address Non-Revenue Water (NRW) concerns with the aid of a Government matching grant. Having reduced NRW in Johor from 37% in 2005 to 25.1% by November 2023 – securing one of the nation’s lowest rates - Ranhill is well-positioned to achieve the NRW target and secure the grant. This promises a double win for both Ranhill and Johor's water infrastructure.

In summary, the revised domestic water tariffs offer a positive outlook for Ranhill's financial performance, ensuring sufficient cash flow for investments in reducing NRW. Additionally, the new TSM facilitates favourable adjustments to water tariffs to keep pace with inflation promoting sustainability and stability in the water industry.

2) Johor-Singapore Partnership: A Gateway to Economic Prosperity

The Johor-Singapore connection stands as a vibrant investment hub, bolstered by an enabling environment that fuels Johor's economic growth. With diverse sectors like finance, technology, and electronics drawing interest, the region offers fertile ground for development. The recent MoU signing for the Johor-Singapore Special Economic Zone drives this potential, with initiatives aimed at attracting multinational corporations through tax incentives and streamlined regulations. Singapore's expertise complements Johor's strengths in land, skilled manufacturing labor, and robust infrastructure.

Furthermore, the Rail Transit Link (RTS), currently 65% complete and set to finish by late 2026, symbolises the progress of this collaboration. This significant infrastructure project will greatly enhance connectivity between the two regions, facilitating the smooth flow of goods and people. Discussions about streamlining customs procedures – such as passport-free travel -  and improved border infrastructure underscore the strengthening economic ties between Malaysia/Johor and Singapore. This collaborative approach strategically positions the region as a unified entity, attracting investments and industries looking to diversify their supply chains amid global trade tensions.

These developments carry significant implications for Ranhill, particularly in the utility services sector. As economic activity and industries flourish in the Johor region, the demand for essential services like water and is poised to soar.

3) Riding Johor’s Data Centre Boom

The Malaysian Government's recent push for data center development, particularly in Cyberjaya and Johor, presents an exciting opportunity for Ranhill. Supportive policies such as NIMP 2030, the Digital Economy Blueprint, streamlined regulatory processes, and tax incentives and cost advantages for land, utilities and infrastructure continue to attract investments and spur growth in this industry.

Data centers face mounting challenges with high water consumption. According to RHB, generally, 1MW of data center capacity requires 25.5k m3 of water annually. Assuming a 500MW data center, this would equate to around 13 million m3 of water consumption annually. Ranhill's expertise in water management positions it perfectly to address this challenge.

Additionally, YTLP's recent partnership with Nvidia to establish AI infrastructure in its Green Data Centre Park in Kulai, Johor, is expected to attract significant investment. This collaboration will bring advanced AI computing services like generative AI (ChatGPT) to Malaysia, strengthening Southeast Asia's AI ecosystem and bolstering Malaysia's semiconductor manufacturing ambitions.

Notably, as the government continues to actively engage and attract investments into digitalisation as part of the Digital Economy Blueprint, cloud services are earmarked under the initiative. This includes efforts to increase local data centres as they are a crucial element in providing high-end cloud computing services, as seen in the pipeline of incoming data centre projects in the table below. According to a 2021 MDEC report, by virtue of nurturing an enabling environment for local data centre companies, the local data centre industry is forecasted to generate RM3.6 billion in revenue by 2025.

4) LSS5: Opportunity to Expand RE Portfolio

Ranhill's successful implementation of the LSS4 Bidor 50MW solar farm underscores its expertise in developing and managing renewable energy (RE) projects, solidifying its position as a key player in Malaysia's transition to a greener energy landscape.

The announcement of the new LSS5 package by the Government marks a significant advancement in Malaysia's RE ambitions, with a target to increase RE capacity from 40% in 2040 to 70% in 2050. Under LSS5, a substantial 2GW quota is available for bidding, including 500MW specifically allocated for floating solar projects, which demand higher engineering technicality.

Notably, LSS5 permits individual developers to bid for projects with a maximum capacity of 500MW, representing a significant increase compared to previous limits. This expansion of the LSS program aims to procure tariff offers at the most competitive rates and enhance the financial sustainability of developing LSS projects through economies of scale.

With Ranhill's proven track record in RE project management, the company is well-positioned to capitalise on the opportunities presented by LSS5 to secure additional RE projects and bolster its portfolio and contributing to Malaysia's ambitious renewable energy targets.

 RANHILL FINANCIAL HIGHLIGHTS

QUATERLY	ANNUALY
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Ranhill enters 2024 with a promising outlook, propelled by a blend of favorable circumstances and strategic opportunities. The recent water tariff adjustment in Johor, along with the Government's push for data center development and the expansion of the LSS program, further bolster Ranhill's prospects. With its expertise and position as the sole water operator in Johor and growing presence in renewable energy, the company is well-positioned to capitalise on emerging trends and ensuring continued success in contributing to Malaysia's economic development and environmental sustainability goals.

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