Quick take: Ranhill slips despite RM50mil contract win

KUALA LUMPUR: Shares in Ranhill Utilities Bhd edged down this morning despite securing a RM50mil contract amid a cautious broader market.

The counter declined 0.5 sen, or 1.16% to 42.5 sen with 99,800 shares traded. It has appreciated 10.3% in the past one month.

Ranhill’s indirect subsidiary Perunding Ranhill Worley Sdn Bhd (PRW) has secured a RM50mil contract to perform detailed engineering design (DED) for Kasawari carbon capture and storage (Kasawari CCS).

The project has a duration of one year and is expected to contribute positively to Ranhill’s earnings for the financial year ending Dec 31, 2023.

Kenanga Research estimated PRW’s order book to expand to RM328mil, equivalent to more than a year’s worth of PRW’s annual revenue.

The research house said the Kasawari CCS DED project is among the largest, other than the recently announced RM124mil contract for DED of a new P-82 floating production, storage, and offloading vessel (FPSO) for Petrobras.

“The bulk of the project is expected to be captured in FY23F. At an estimated project margin of around 9%-10% and based on Ranhill’s 51% stake in RWSB, we estimate the project to contribute RM2.6mil to Ranhill’s net profit, or 6% of FY23F earnings.

“As this forms part of our order book replenishment assumption for PRW, we keep our projections unchanged at this juncture. Nonetheless, this is a positive development in sustaining RWSB’s contribution to the group,” Kenanga said.

“Having seen significant retracement in the past year, we think Ranhill’s share price is reaching an inflection point with the contraction in RSAJ’s earnings from a delay in tariff hike well priced in and reflected in consensus earnings revisions,” it added.

The research house expects the potential Ranhill SAJ tariff hike to be a key near-term re-rating catalyst.

It has maintained its “buy” call and SOP-derived target price at 67 sen.