Ranhill Utilities Bhd received conflicting signals from two research houses after it released what looks like stellar top line numbers for its latest quarter.
In two separate reports released yesterday, MIDF Research maintained its ‘Buy’ call on the stock with a 52-week target price of 73 sen while Maybank Investment Bank Group kept its ‘Hold’ call with a lower target price of 60 sen.
Ranhill Utilities shares closed yesterday at 61 sen, with 16.5 million shares exchanging hands, the highest since April 26. In the last one year, the stock had hit a high of 66 sen and low at 35 sen.
For the second quarter ended June 30, 2023 (2Q23), Ranhill Utilities posted a net profit of RM12.06 million, up 72% from the same period a year earlier, on the back of RM593.67 million in revenue, up 30% from 2Q22.
For the first half, the company’s net profit was up 61% to RM23.18 million on the back of RM1.11 billion in turnover, up 31% from the same period a year earlier.
In its report, MIDF Research said the 1H23 result came in within expectations.
It said Ranhill Utilities’ near to mid-term prospects was underpinned by the Large Scale Solar 4 (LSS4) project completion and the new 100MW combined-cycle gas turbine (CCGT) plant.
It said it likes Ranhill for its earnings expansion potential on the count of its expansion into Indonesia source-to-tap water supply (432MLD capacity) and the LSS4 project which is expected to reach commercial operation date (COD) by December 2023.
The other factors were the completion of the Sabah West-East grid upgrade which it said should drive higher dispatch from RP1/RP2 to Sabah’s East Coast, potential water tariff hike for the domestic sector and the completion of its 100MW West Sabah CCGT plant by March 2026.
It said the counter’s dividend yield is attractive at 5% and reversion to cash dividends is positive. At the present target price, it has estimated an expected total return of 26.41%.
In its report, MIBG Research said that Ranhill’s 2Q23 result was below its expectation but in line with consensus, adding that it believes the water tariff hike thesis has largely played out for now.
“In our view, further share price upside is contingent upon 1) more rigorous regulatory reforms for the water industry and 2) crystallization and completion of new projects. We have yet to include Ranhill’s new power projects in our forecasts,” it said in its research note released yesterday.
The Johor-based Ranhill Utilities is led by Tan Sri Hamdan Mohamad, its chairman, CEO and non-independent executive director.
Hamdan is the sole beneficiary of Hamdan L Foundation which is the company’s largest shareholder with a 24.1% stake. Next comes TAEL Partners Ltd with a 18.8% stake. – TMR