PETALING JAYA: Despite short-term earnings pressure, Ranhill Utilities Bhd
’s longer-term prospects are looking increasingly buoyant, analysts say.
This is underpinned by rising water demand from the rising number of data centres in Johor and supportive regulatory reforms in the pipeline, according to analysts.
RHB Research said it expects sustained industrial demand to bolster Ranhill’s profitability, particularly as Johor attracts more investment in data centres and manufacturing, including projects linked to the Johor-Singapore Special Economic Zone.
“We continue to believe data centre-driven demand should bolster its long-term profitability, with potentially another round of upcoming water tariff hikes this year,” the research house noted.
RHB Research maintained a “buy” call on Ranhill with a target price of RM1.37, citing strong water demand growth, an expected new data centre tariff category and the upcoming national non-revenue water programme.
TA Research similarly sees growth potential.
“Johor is expected to benefit from the influx of data centre infrastructure, in part, given spillover demand from Singapore,” it said.
In a recent meeting with the National Water Services Commission, it was revealed that data centres in Johor currently require up to 368 million litres per day of water. This is expected to rise to 586 million litres by 2030.
TA Research highlighted that Johor’s water treatment capacity is due for a significant expansion of 673 million litres per day between this year and 2030, potentially easing supply constraints.
It added that Ranhill may also gain from involvement in renewable-energy initiatives.
“Ranhill is looking to participate in the corporate renewable energy supply scheme introduced by the Energy Transition and Water Transformation Ministry,” TA Research noted.
The research house raised its target price to RM1.40 from RM1.05 and upgraded Ranhill to “buy,” citing a more favourable regulatory environment and reduced risk premiums for its water operations.
MIDF Research, however, remained cautious.
While acknowledging the strategic value of YTL Power International Bhd’s increased stake and synergies it could bring, the research house flagged concerns about Ranhill’s valuation.
“We maintain our ‘sell’ call and revise our target price lower to RM1.02 after trimming our earnings estimates,” it said.
Ranhill recently reported a 61% quarter-on-quarter drop in net profit to RM6.94mil for the three months ended March 31, 2025, due to cost overruns, while revenue dipped slightly to RM513.15mil from RM522.45mil.
