Above average ESG score of 56

Ranhill’s overall ESG score is 56 (out of 100), which makes its ESG rating above the average of 50 under our proprietary ESG scoring methodology. Ranhill has an established framework, internal policies and tangible mid/long-term targets in relation to ESG. Fundamentally, we have a SELL rating with a MYR0.70 SOP-based TP.

Operationally aligned

Ranhill’s ESG targets are relatively basic - net zero by 2050, with the group in the process of developing a GHG baseline and roadmap for its operations. The operational targets pertaining to NRW (non-revenue water) reduction at subsidiary RSAJ are inherently sustainability-related. Ranhill also aims to raise its RE generation capacity (its 50MW solar farm will be completed by end-2023), and intends to power its water treatment operations with solar energy.

Remuneration on the higher end

Ranhill’s ESG disclosures are commendable and cover Scope 3 emissions (pertaining to purchase of goods & services and employee commutes). Scope 2 emissions were higher in FY22 due to more electricity consumed for water treatment. On governance metrics, we note the remuneration of the CEO and board represent a relatively high percentage of net profit, although this is, in our view, more a consequence of net profit being depressed due to regulatory constraints.

Maintain SELL

Our net profit forecasts and MYR0.70 TP (derived from a sum-of-parts with RSAJ and the power plants valued on DCF) are unchanged. Current valuations are rich, and we believe the possibility of a general offer in the near term is low (and already priced-in). A water tariff hike is a possibility, but would likely be accompanied by higher lease payments to PAAB in our view.

Source: Maybank Research - 29 Dec 2023