KUALA LUMPUR (Nov 24): RHB Research expects Ranhill Utilities Bhd (KL:RANHILL) to benefit from rising water demand in Johor, supported by ongoing infrastructure expansion. 

Although RHB kept its earnings forecasts unchanged, it raised its target price by shifting its valuation to the financial year ending June 30, 2027 (FY2027) and lowering the discount rate for the water segment to 5% from 6%. These adjustments reflect the company’s solid earnings outlook and stronger expected water consumption, it said in a note.

RHB maintained its 'buy' call on Ranhill, and raised its target price by 31% to RM2.30.

RHB expects the group to post RM12 million to RM15 million in core profit, sharply higher than the RM6 million recorded in the sixth quarter ended June 30, 2025, supported by tariff adjustments. FY2025 had an extended 18-month reporting period following a change in Ranhill's financial year end.

Johor’s accelerating data centre buildout is also emerging as a major structural driver. The state is targeting 48 date centres to operate by 2030, up from 15 now, reflecting the rapid pace of digital infrastructure investment in the region.

Therefore, based on industry usage norms of 0.07 million litre per day (MLD) of water per megawatt (MW), the additional 3.4GW of committed data centre capacity could require about 238 MLD.

Separately, RHB estimated that about 1,100 MLD of additional near-term water supply capacity will come from upcoming water treatment plants, including the 60 MLD Semanggar WTP (2026), 150 MLD Layang 2 Phase 2 (2027), and roughly 890 MLD from three other plants expected to come online beyond 2027.

These expansions support Johor’s plan to raise total water capacity to around 3,000 MLD by 2030, from 2,352 MLD currently. After meeting data centre needs, 700 MLD could be channelled to industrial zones and new residential growth around Johor Bahru.

Meanwhile, Ranhill Technologies may gain from the government’s RM2.5 billion National NRW Programme (2025-2030), having RM61.5 million pipe replacement jobs in Kelantan and the ongoing UK collaboration with YTL Construction on Wessex Water works.

The stock was unchanged at RM1.75 at the time of writing on Monday, valuing the company at RM2.28 billion. It is up 15.79% this year.