RANHILL has secured a RM283.9mn NRW reduction contract in Johor in a related party transaction. This is the 7th consecutive NRW project in Johor that the group has secured since 2011. We view the contract win positively as this would improve the margin of Ranhill SAJ compared with outsourcing it to an external party. No change to our earnings forecasts. Maintain Hold with an unchanged target price of RM0.96/share based on sum-of-parts valuation.

Secures RM283.9mn Contract for NRW Reduction in Johor

Ranhill Utilities Berhad (RANHILL) has secured a RM283.9mn non-revenue water (NRW) reduction contract in Johor. The project is a related party transaction as it was awarded by its 80%-owned subsidiary Ranhill SAJ Sdn Bhd to its indirect wholly owned subsidiary Ranhill Technologies Sdn Bhd (RT) (formerly Ranhill Water Services Sdn Bhd).

This is the 7th consecutive NRW project in Johor that RANHILL has secured via a competitive open tender since 2011. The project will last for 36 months from 1 Jan 2024 to 31 Dec 2026.

Our Take

We are not surprised by the contract win as RT has been providing NRW reduction services for Ranhill SAJ since 2011. Since the project is a part of Ranhill SAJ’s usual operating expenditure, we view the contract win positively as this would improve the margin of Ranhill SAJ compared with outsourcing it to an external party.

Notably, Ranhill SAJ’s NRW in 2022 was 26.3% while the latest NRW figure in 2023 was 25.1% as of 30 Nov. If Ranhill SAJ can maintain its NRW level at below 25.5% for the year, the group will be entitled to a matching grant of 50% of the costs incurred for undertaking related works, which will be recognised in FY24.

Impact

No change to our earnings forecasts as the job win is part of Ranhill SAJ’s usual operating expenditure.

Valuation

Maintain Hold with an unchanged target price of RM0.96/share based on sum-ofparts (SOP) valuation.

Source: TA Research - 15 Dec 2023