KUALA LUMPUR: A water tariff hike in Johor for non-domestic users may double Ranhill Utilities Bhd (RUB) net profit for the financial year 2023 (FY23).

Maybank Investment Bank noted that Ranhill Syarikat Air Johor Sdn Bhd (RSAJ) is Johor's exclusive water source-to-tap operator and the main earnings contributor to Ranhill.

The lack of a tariff hike in recent operating periods has resulted in significant earnings pressure at RSAJ and thus on RUB.

"The federal government had, in June 2022, approved an average 25 sen/m3 tariff hike for non-domestic users effective August 2022.

"We assume an average hike of 15 sen/m3 (+4.6 per cent) for Johor non-domestic users from January 2023, culminating in a 2.5 per cent increase in overall tariff.

"Along with volume recovery, we forecast a more than doubling of FY23 net profit," the bank-backed research firm said in a note.

It stated that RUB has historically been active in pursuing new opportunities, with a notable recent success being the 50 megawatt (MW) large-scale solar power plants.

RUB is also pursuing a water source-to-tap project in three areas of Jawa, Indonesia.

"It has submitted a tender for developing a new 100MW gas-fired plant in Sabah (targeted 2025 commissioning).

"Talks are also underway with the energy commission for a 75MW solar farm in Kluang, Johor, to partially power RSAJ's operations," it said.

The research firm initiated coverage of the company with a 'Buy' rating and a target price of 60 sen.

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