INVESTMENT HIGHLIGHTS

(Pre-bonus TP: RM1.60)

• Housekeeping adjustments for 1-for-5 bonus issue

• Slew of corporate proposals approved at EGM

• DRP allows cash retention while maintaining yields

• Re-affirm BUY at adjusted ex-bonus TP of RM1.35

Adjustments for bonus issue. Ranhill’s shares went ex-bonus on 26th April 2019. Ex-bonus reference price has been adjusted to RM1.18 (closing price cum-bonus: RM1.42). In tandem with the exercise, our original pre-bonus TP of RM1.60 is adjusted to an ex-bonus TP of RM1.35.

Corporate proposals approved. To recap, in its recent EGM, shareholders approved three proposed corporate exercises: (1) A 1 for 5 bonus issue (2) Establishment of a dividend reinvestment plan (DRP) (3) Long-term incentive plan for staff up to a maximum 10% of outstanding shares. The 1-for-5 bonus issue involves the issuance of 177.7m new shares, which expands Ranhill’s outstanding share base by 20% to 1,066m shares from the original 888.3m shares. The bonus shares are expected to be credited into shareholders’ accounts by 4pm today.

The DRP allows Ranhill to retain cash while maintaining dividend payout, but entails gradual dilutive impact over the long run for shareholders opting for cash dividends. The DRP is targeted to be implemented from Aug19, which coincides with the 2Q19 results (and interim dividend) announcement period. Meanwhile the LTIP is expected to be implemented from Oct19.

Recommendation. Re-affirm our BUY call on Ranhill at our new exbonus TP of RM1.35. Key catalysts: (1) Scheduled rate hike for Johor water (2) Johor water-sewerage integration (3) RM500m NRW-reduction contract wins (4) Progress in 1150MW Kedah CCGT power export to Thailand.

Source: MIDF Research - 30 Apr 2019