PETALING JAYA: The potential revision of domestic water tariffs provides scope for upside for most water players including Ranhill Utilities Bhd.
This could be a positive catalyst for Ranhill, though the magnitude of revision could be smaller than the prior non-domestic tariff revision given the former entails a much lower base tariff.
Even so, MIDF Research likes Ranhill for its expansion into renewable energy and growth prospects under the National Energy Transition Roadmap (NETR) and as one of the few plays into domestic and regional water operations.
RHB Research believes Ranhill’s domestic growth prospects lie in the NETR, which focuses on carbon capture and storage (CCS) and solar power.
This could benefit Ranhill as the group targets to achieve 1,000MW of energy generating capacity by 2027.
Ranhill’s engineering services arm is already involved in the Kasawari CCS project, in addition to its 50MW LSS4 solar farm in Bidor, Perak.
RHB also views Ranhill to be a Johor thematic play in light of the anticipated growth in data centers and property projects which may further spur demand for water.
It adds that a cross-border opportunity would be Ranhill’s potential participation in the Indonesian Djuanda source-to-tap water project with an estimated treatment capacity of 605 million liters per day. The Ranhill-led consortium may participate in a public tender via an initiator status once feasibility studies are approved.
It recently signed a memorandum of understanding signed with China Energy International Group is to jointly pursue the Djuanda source and other projects in South-East Asia.
This may provide a cushion for its balance sheet from being over-stretched as the project has an estimated capital expenditure of about US$700mil to US$900mil, RHB Research noted.
TA Research also remains sanguine on the outlook of Ranhill due to the potential increase in domestic water tariff, the expansion into Indonesia via the Djuanda Source-to-Tap project.
Its large-scale solar project will begin commercial operational by the end of this year, and a new 100 megawatt combined cycle gas turbine power plant in Kimanis, Sabah, is expected to be commercially operational by March 1, 2026.
TA Research noted that considering the better prospect of the group, it had raised its target price (TP) for Ranhill to 96 sen a share from 70 sen per share but downgraded its call to a “hold”.
MIDF said given the exceptionally strong share price rally since the entry of YTL Power International Bhd as a substantial shareholder, it has downgraded Ranhill to “neutral” from a “buy’’ previously with a TP of 80 sen a share.
RHB maintains its “buy’’ call with a TP of RM1.09 a share on the utility company.