The knee-jerk reaction to yesterday's announcement of YTL Power's (6742.KL) mandatory takeover offer (MTO) at RM0.995 triggered a flurry of sell signals among the weak holders of Ranhill Utilities (5272.KL). The intensity of this offer price caused Ranhill’s share price to plummet from a previous close of RM1.57 to an intraday low of RM1.23 (-21.7%).

As the adage goes, "Buy on rumor, Sell on news"—a common short-term strategy for traders. However, for long-term investors, this presents a significant opportunity to BUY the stock at a BIG DISCOUNT.

WHY? AN OPPORTUNITY?

What has changed in the company? The ownership of Ranhill Utilities has transitioned from Tan Sri Hamdan to YTL Power and its 70%-owned subsidiary, SIPP Power Sdn Bhd. Everything else, remained the same.

Siapa Boss SIPP Power Sdn Bhd? If you comb through the offer document, the acquirer of the stake is SIPP Power Sdn Bhd (a 70%-owned subsidiary of YTL Power International Bhd). It will be very interesting to note who is the remainder 30% stake in SIPP Power Sdn Bhd. (https://ytlcommunity.com/shownews.asp?newsID=4853) read and research and you will know. 

The Change in Shareholders Is It Better or Worse? For this, let the value creation speak for itself. Over the past 3 years, YTL Power's share price has surged by over +600%, while Ranhill Utilities has increased by +245%.

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With The New Shareholder What Could Happen? With the entry of new shareholders, there will naturally be a new lineup of management and board of directors, which will change the management style and growth direction of Ranhill Utilities. Moving forward, the CAPEX cycle for Ranhill is likely to accelerate to align with Johor's robust economic growth and its aspirations to become a regional data center hub. This includes realizing the Johor-Singapore Special Economic Zone, positioning the company for enhanced growth and strategic development. Aside from Johor property plays, Johor data center names, and Johor manufacturing names, there are no other companies as directly integrated into Johor's economy as Ranhill Utilities. Ranhill’s pivotal role in providing and maintaining water infrastructure positions it uniquely to benefit from and contribute to Johor's economic growth, making it a critical player in the region's development and strategic initiatives.

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​Does the Mandatory Take Over (MTO) Offer Price Matters? In this case, it doesn't matter. Since the MTO offer price is well below the current market price, no rational shareholder of Ranhill Utilities would agree to surrender their shares at such a discount. This chess piece move is also indifferent from Chin Hin Group's take over offers. 

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So why YTL Power Offer So Low?
Simply, that's because YTL Power only value the vendor's stake at the RM0.995/share level since there are more money that is required to be deployed for the expansion of Johor state's water network into new growth areas. According to the mandatory takeover documents, YTL Power and SIPP intend to maintain the listing status of Ranhill Utilities. This suggests their intention to tap into the capital market for future CAPEX funding, potentially leading to an upside beyond the current offer price of RM0.995 per share. Moreover, keeping Ranhill Utilities listed ensures good governance, transparency, and public oversight.

Conclusion:

All in all, there is simply no compelling reason to sell Ranhill Utilities. Yesterday's sell down is simply a manifestation of fear and emotional over-surged. For the calm and composed, an opportunity to buy. Despite the change in ownership, it remains a valuable regulated utility asset in Johor. The transition to a more progressive management team and major shareholders like YTL Power and SIPP should be seen as a re-rating catalyst rather than a de-rating one, especially considering the low offer price of RM0.995. Ranhill Utilities shareholders are now better positioned to benefit from Johor’s growth potential. Additionally, the involvement of YTL Power hints at a potential data center play, adding another layer of opportunity to Ranhill Utilities' investment appeal.

For the emotional investors, imagine what will happen to share price when Ranhill changes its name from Ranhil Utilities (5272.KL) with a YTL-XXX prefix in front of it. Another surge in Share Price?