Ranhill is an industry leader in its chosen business sectors of Environment and Energy.  Ranhill has continued to distinguish themselves as world-class in water and power operations and for setting industry benchmarks.

For the environment sector, Ranhill provides:

1. Water supply services
2. Water, wastewater and reclaimed water treatment plants in China and Thailand
3. Management and optimization of water companies assets - Specialized in Non revenue water reduction programme

The environment sector lead by Ranhill Saj Sdn Bhd has always been the main contributor (70%-80%) of the Group's revenue and profit, with an average PAT margin of 8-9% since the streamlining exercise of the country’s water industry in 2009.

For the power sector, Ranhill develops, owns and operates power plants as Independent Power Producers (IPP).

Ranhill had their EGM in end June where all the resolutions were all passed for the acquisition of 100% equity interest in Ranhill Bersekutu Sdn Bhd (RBSB) with a purchase of RM93.9 million and the acquisition of 51% equity interest in Ranhill Worley Sdn Bhd (RWSB) with a purchase of RM118 million. These acquisitions were completed on 16 July. These are 2 established companies, well known with proven track record in their area of operations.

What were the challenges faced by Ranhill before the acquisitions?

The power sector had a reduction in its revenue and profit during the last few years. Why reduction?

• due to lower load factor as the demand for electricity in Sabah were lower than anticipated, especially from the non-domestic sectors.
• the decline was further exacerbated in 2019 due to Ranhill Powertron I Sdn Bhd's scheduled reduction in tariff upon full settlement of its Islamic medium term notes project financing.

As an investor, I’ve looked into the circular and find the new acquisition quite interesting.

How these both acquisitions can benefit Ranhill?

1. An opportunity for the Group to provide new income streams and venture into the business of:

• providing engineering, procurement and construction management services, project management services and supervision
• ancillary services in the infrastructure, chemicals, resources and energy

2. Assist to partially mitigate the lower profit from the power sector due to lower tier tariff.
3. Diversify their earning base as the contribution from both RWSB and RBSB can contribute 25% or more of the net profits of our Group.
4. It will strengthen and support the expansion of Ranhill Group's business into technical services by leveraging on RBSB's strong track record in providing engineering services to companies in the construction, water and power industries.
5. RWSB Acquisition provides an opportunity for Ranhill Group to generate new income from the O&G industry, petrochemical business and new energy business.
6. RWSB and RBSB with strong profitability record and consistently generating positive cash flow will contribute to Ranhill’s future profit and cash flow.
7. Improvement in Ranhill’s gearing ratio from 2.32 times to 1.63 times(total borrowing)
8. Improvement in Net asset and shareholders fund from RM463.9 million to RM670.4 million.
9. Positive contribution to consolidated earnings and EPS of Ranhill.

Ranhill Bersekutu Sdn Bhd

• RBSB is a leading Malaysian engineering firm which was incorporated in 1981.
• RBSB is a multi-disciplinary engineering consultancy providing:

• Comprehensive engineering (Geotechnical, Civil, Structural, Mechanical and Electrical)
• Project management
• Ecologically Sustainable Design/Green Building technology services

• RBSB has been offering the engineering services and expertise for the following sectors:-
  • Transportation related Projects on Highways, roads, bridges, Airports, Ports, Rail and Transit Systems
  • Civil Infrastructure township designs
  • Water Catchment, Treatment and Distribution along with Wastewater Treatment
  • Buildings
  • Power and Industrial Plants
  • Ecologically Sustainable Design/Green Building technology services environmental-impact assessment (EIA), management and monitoring


• Currently, 30% of RBSB's business is in water and wastewater treatment engineering which represents a strategic fit for the Group.
• The remaining 70% of its business is mainly in the engineering services for transportation sector covering highways, rails and roads, civil infrastructure covering township and engineering, procurement, construction, and commissioning solutions.

• The valuation seems to be fair after taking into consideration on the PE of 12.5 times of the PATMI based on the FPE 31 December 2020 of RBSB.  In view of the valuation range of RBSB of between RM85.76 million to RM96.71 million given by FHMH Corporate Advisory. Ranhill purchased it at RM93.88 million.

Ranhill Worley Sdn Bhd

• RWSB is a joint venture entity between the Worley Australia(49%) –Australia’s largest exporter of knowledge-based services and second largest Engineering Chemical and Resources(ECR) in the world and Ranhill Group(51%) since 1996.
• RWSB, a leading global provider of professional project and asset services in the energy, chemicals, and resources sectors.
• RWSB delivers projects and provides expertise in
• engineering, procurement and construction management (EPCM)
• upgrading of existing O&G assets in the upstream offshore, downstream refining, gas processing, liquified natural gas regasification and chemicals

• RWSB deliver services primarily to the upstream portion of the O&G industry.
• RWSB is capable to provide services in the following:-

• design, fabricate and construct new facilities
• upgrading, modernizing and expanding existing facilities
• rebuild facilities
• provide consultancy services ranging from feasibility studies to process assessment to project structuring and studies.

• The valuation seems to be fair after taking into consideration on the PE of 12.5 times of the PATMI based on the FPE 31 December 2020of RWSB.  In view of the valuation range of RBSB of between RM106.28 million to RM117.96 million given by FHMH Corporate Advisory.  Ranhill purchased it at RM117.96million.

Why these acquisitions are interesting to me?

1. RBSB primarily focused in providing engineering design service which would complement Ranhill Group's business in water and wastewater treatment engineering market segment and improve the operations of these businesses.
2. RBSB is targeting to strengthen its involvement in rail development based on recent experience with the reference design checker for KL-Singapore highspeed rail.
3. This will include participation in the upcoming Klang Valley MRT3 and future developments of any high-speed rail.
4.  This will inevitably benefit engineering and project management services capabilities of Ranhill.
5. With the acquisition of RWSB, it grants the Group a synergistic advantage as it will allow the Group to explore a new sector with a proven existing player.
6. This has allowed Ranhill to utilize the capabilities and technology from the transition and new energy sector such as biomass, windfarm structures, and storage systems for renewable energy from Worley.
7. RWSB provides a unique opportunity for Ranhill which it will be able to transform Ranhill into a player in the transition and new energy section in Malaysia on top of being a well-established company with an exceptional track record.

Financial and prospects

Both companies, having been in operation for over 20 years have developed proven business strategies towards achievement of their financial targets.

• Based on both tables above gotten from the circular on 14 June 2021, the gross profit margins of RBSB generally ranges between 19.39% to 25.99% whilst the gross profit margins of RWSB ranges between 25.82% to 28.44% in the past 3 financial years.
• In the latest unaudited 12-month FPE 31 December 2020, RBSB and RWSB have each recorded a PAT of approximately RM7.51 million and RM18.50 million respectively.

• Both companies have been consistent in generating positive cash flows from operations over the past 3 years.
• On proforma basis, the 2 new acquisitions will contribute additional PAT of RM12.8 million and RM16.9 million for FY2019 and FY2020 respectively, excluding the expenses relating to the proposals, to the Group which translate to an increase of 35% and 46% of the overall group PAT.
• The 2 companies being provider of services in engineering, project management and O&M, comes with negligible company borrowing and very low fixed assets
• Both companies will be an invaluable addition and complementary to the Group’s water and power division as well as supporting the development on renewable energy such as solar, hydro and biomass.
• Further to that, RBSB offers a good opportunity for the Group to expand into transport and civil infrastructure sector.
• In addition, the Diversification into the business of infrastructure, chemicals, resources and energy such as provision of engineering services and project management will also provide Ranhill Group with the opportunity to diversify its earnings base and reduce its dependency on its existing business segments of concession and long term renewable license in the water and power sectors.

Personal Opinion

• With these two new acquisitions, Ranhill Group has 2 valuable companies in its coffer. RBSB has a track record of 40 years while RWSB has and 25 years track record.  The acquisitions are earnings accretive besides the potential growth could be accrued from the synergies from the businesses.
• I think both acquisitions and diversification will be an attractive business proposition and offers good growth opportunities for the Ranhill in the long term, taking into consideration the improved prospects for the oil and gas industry and favourable prospects for the construction industry.
• I believe Ranhill has acquired 2 valuable assets that fit the company’s profile. I will watch this space closely on how Ranhill to unlock the values. When Malaysia reaches its herd immunity, recovery play like Ranhill should surprise the market on the upside. Hence, I said Ranhill is underated now.  Think about it….