Ranhill Utilities Berhad Kitchen Sinking Before a Strong FY26F Ahead

Review

• Ranhill Utilities Berhad’s (RANHILL) 18MFY25 result came in stronger than our expectation but weaker than consensus, registering a core net profit of RM46mn (excluding net exceptionals of RM1.7mn), which accounted for 110% of our and 70% of consensus estimates respectively.
• We attribute the stronger than expected performance to the water division given sustained strong demand from growing data centre consumption as well as narrower than expected underlying core losses at the services division.
• Sequentially, group PAT grew substantially driven mainly by the water division given recognition of a RM159mn NRW grant during the quarter, which was partly offset by a one-off settlement of OP5 lease rental amounting to RM92mn.
• In addition, the group recognised a RM19.5mn impairment of project development cost, reflecting the full impact of its decision to discontinue pursuing the Djuanda Indonesian water supply project.
• Meanwhile, the services division was dragged by a RM30mn write down of work in progress at 51%-owned Ranhill Worley Sdn Bhd’s Qatar North Field Production Sustainability (NFPS) project.
• Although buffered by Ranhill SAJ’s (RSAJ) receipt of an NRW grant, the 6QFY25 largely reflects a kitchen-sinking quarter but we believe most of the pain has already been taken at this juncture.

Impact

• Given the stronger than expected underlying performance, we raise FY26F-27F net profit by 2%-5%. We also introduce FY28F net profit at RM62mn, reflecting a conservative 3% YoY growth against FY27F.

Outlook

• Johor is expected to benefit from the influx of data centre (DC) infrastructure, in part, given spillover demand from Singapore. As Johor’s exclusive source-to-tap water supply operator, RANHILL is expected to benefit from increased water demand from DCs for cooling purposes.
• Our prior meeting with the National Water Services Commission (SPAN) Southern Region suggests that DCs based in Johor are ‘demanding’ up to 368MLD of water supply currently, which could potentially rise to 586MLD by 2030. We estimate actual DC consumption currently account for ~8% of total demand but this could rise to as high as 36% should SPAN’s 2030 projection materialise.
• The recent water tariff hike effective 1 August 2025, which mainly affects Johor’s non-domestic consumers and data centres will provide an earnings catalyst moving into FY26. As per our prior update, we estimate RSAJ’s blended tariff to increase by 18% to RM2.89/m³. More importantly, the accompanying water infrastructure expansion will unlock RSAJ’s ability to meet DC-driven demand going forward. According to DC Byte, Johor has live DC capacity of 487MW with another 324MW capacity under construction and 1473MW of committed capacity.
• In the power segment, RANHILL is exploring opportunities to participate in the Corporate Renewable Energy Supply Scheme (CRESS) introduced by the Ministry of Energy Transition and Water Transformation (PETRA) which allows corporate consumers access to green electricity by procuring green electricity supply directly from a renewable energy producer.
• YTLPOWR, the group’s major shareholder, has plans to develop a 500MW solar farm at its YTL Johor Data Centre Park in Kulai, Johor. We do not rule out possibilities of this project being parked under RANHILL, which could provide another catalyst for the group further out. In addition, RANHILL is also participating in the Energy Commission’s tender to develop 4 X 100MW/400MWh Battery Energy Storage System (BESS).

Valuation

• Maintain Buy at a higher sum-of-parts derived target price of RM1.59 (from RM1.56 previously) following the earnings revision in this report. We continue to like RANHILL as a proxy to DC and JS-SEZ driven demand, being the exclusive source-to-tap water operator for Johor.

*FYE Dec **18mth period due to change in FYE to June from December

*FY25 to reflect an 18-mth period (or 6 quarters instead of 4) due to change in FYE to June from December

^Unavailable due to change in FYE to June from December

Source: Ranhill SAJ, TA Securities

Sector Recommendation Guideline

OVERWEIGHT: The total return of the sector, as per our coverage universe, exceeds 12%.

NEUTRAL: The total return of the sector, as per our coverage universe, is within the range of 7% to 12%.

UNDERWEIGHT: The total return of the sector, as per our coverage universe, is lower than 7%.

Stock Recommendation Guideline

BUY : Total return of the stock exceeds 12%.

HOLD : Total return of the stock is within the range of 7% to 12%.

SELL : Total return of the stock is lower than 7%.

Not Rated: The company is not under coverage. The report is for information only.

Total Return of the stock includes expected share price appreciation, adjustment for ESG rating and gross dividend. Gross dividend is excluded from total return if dividend discount model valuation is used to avoid double counting.

Total Return of the sector is market capitalisation weighted average of total return of the stocks in the sector.

ESG Scoring & Guideline

Disclaimer

The information in this report has been obtained from sources believed to be reliable. Its accuracy and/ or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein.

As of Tuesday, August 19, 2025, the analyst, Hafriz Hezry, who prepared this report, has interest in the following securities covered in this report:

(a) nil

Kaladher Govindan – Head of Research

TA SECURITIES HOLDINGS BERHAD 197301001467 (14948-M)
A Participating Organisation of Bursa Malaysia Securities Berhad
Menara TA One 22 Jalan P. Ramlee | 50250 Kuala Lumpur | Malaysia | Tel: 603 – 2072 1277 | Fax: 603-2032 5048
www.ta.com.my

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