COMPANY UPDATE
Tuesday, August 05, 2025
FBMKLCI: 1,526.98
Sector: Power & Utilities
THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY*
Ranhill Utilities Berhad
Water Tariff Hike Materialises
Tel: +603-2167 9730
hafrizhezry@ta.com.my
www.taonline.com.my
What’s new?
The Cabinet has gazetted a water tariff hike effective 1 August 2025. For the state of Johor, the water tariff hike will affect mainly non-domestic users, including a new category for data centres (DC), while for the domestic segment, only high consumption users and domestic bulk users will be impacted. According to Ranhill SAJ (80%-owned by RANHILL), the adjustments are necessary to support modernisation of Johor’s water supply system and fund key upgrading projects, including the second phase of the Layang 2 package with a capacity of 160MLD as well as Semanggar (50MLD) and Semanggar 3 (120MLD).
In summary, the increase in water tariff for the non-domestic segment ranges between 31.7% and 49.3%, while minimum monthly charges were increased by 31.7%. Meanwhile, DCs will be charged RM5.33/m³ (which is slightly higher than the highest band for non-domestic users) with a minimum monthly charge of RM53.30. For the domestic segment, tariff for the 3rd usage band (>35m³ consumption) is increased by 11.1% while domestic bulk users will see a 7.8% increase (see Figure 3).
A shot in the arm for RSAJ
Following the underlying tariff revisions, we estimate Ranhill SAJ’s (RSAJ) blended tariff to ultimately 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. Based on Johor’s live DC capacity of 487MW (see Figure 2), we estimate DC water demand currently accounts for around 8% of Johor’s aggregate consumption (or circa 122MLD). Should the Johor-based DCs under construction (324MW) and committed capacity (1,473MW) materialise, we estimate water demand could rise multi-fold to circa 570MLD. At this juncture however, our projection conservatively assumes Johor’s DC capacity to hit just under 1GW by 2030, with aggregate consumption growing at a CAGR of 4.1% between 2025 (annualised) and 2030.
Figure 1: Johor DC Capacity
Category | Capacity (MW) |
---|---|
Live | 487 |
Under construction | 324 |
Committed | 1,473 |
Early Stage | 3,491 |
Source: DC Byte, TA Securities
Notwithstanding the tariff hike, Singapore’s non-domestic water tariff is still 10%-103% higher than Johor’s highest band for the non-domestic sector. As such, we believe the latest tariff hike is unlikely to compromise Johor’s competitiveness in attracting inbound investments from Singapore.
Figure 2: Johor and Singapore Non-Domestic Water Tariff
SG Non-Domestic | Johor Non-Domestic | Johor Data Centre | |||
---|---|---|---|---|---|
Potable | NEWater | Industrial | |||
SGD/m³ | 3.24 | 2.50 | 1.75 | N/A | N/A |
RM/m³ | 10.76 | 8.30 | 5.81 | 4.15-5.30 | 5.33 |
Source: Ranhill SAJ, PUB, TA Securities
Earnings Revision
We raise RANHILL’s FY26F-27F net profit by 14%-20% to reflect the latest water tariff hike at 80%-owned RSAJ.
Valuation and Recommendation
Maintain Buy at a higher sum-of-parts derived target price of RM1.56 (from RM1.40 previously) following the earnings revision. We continue to like RANHILL as a proxy to DC and JS-SEZ driven demand, being the exclusive water operator for Johor.
Figure 3: Johor Water Tariff Schedule
Type of Use | Utilisation | Previous Rate (RM/m³) | New Rates (RM/m³) | change (%) | Previous Min. Rate (RM) (monthly) | New Min. Rate (RM) (monthly) | change (%) |
---|---|---|---|---|---|---|---|
Domestic | 0 m3 – 20 m3 | 1.05 | 1.05 | 0.0% | 10.50 | 10.50 | 0% |
21 m3 – 35 m3 | 2.35 | 2.35 | 0.0% | ||||
> 35 m3 | 3.15 | 3.50 | 11.1% | ||||
Religious Institutions / Welfare | Average rate | 1.65 | 1.65 | 0.0% | 16.50 | 16.50 | 0% |
Domestic Bulk | Average rate | 2.55 | 2.75 | 7.8% | 25.50 | 27.50 | 8% |
Non-domestic | 0 m3 – 35 m3 | 3.15 | 4.15 | 31.7% | 31.50 | 41.50 | 31.7% |
>35 m3 | 3.55 | 5.30 | 49.3% | ||||
Shipping | Average rate | 7.05 | 8.03 | 13.9% | 70.50 | 80.30 | 13.9% |
Data Centre | Average rate | N/A | 5.33 | N/A | N/A | 53.30 | N/A |
Source: Ranhill SAJ, TA Securities
Figure 4: RANHILL SOP Valuation
SOP Valuation | Equity Value (RM mn) | Stake | Equity Value/Share (RM) | Basis |
---|---|---|---|---|
Environment | ||||
Ranhill SAJ | 1,642.8 | 80% | 1.02 | Discounted Cash Flow |
Associates – RWT Hong Kong | 366.1 | 40% | 0.11 | 8x Target Forward P/E |
Energy | ||||
RSEI | 34.3 | 60% | 0.02 | Discounted Cash Flow |
RSEII | 53.9 | 80% | 0.03 | Discounted Cash Flow |
LSS 4 | 204.2 | 100% | 0.16 | Discounted Cash Flow |
Services | ||||
Worley, Bersekutu, RT, RWT | 227.7 | Various | 0.18 | 8x Target Forward P/E |
Gross SOP Value | 1.52 | |||
Add: ESG Premium | 0.05 | 3% ESG Premium | ||
SOP Value/ Target Price | 1.56 |
Financial Statements & Ratios
*FYE Dec. **18mth period due to change in FYE to June from December.
Income Statement (FYE 30 Jun, RMmn) | 2022* | 2023 | 2025E** | 2026F | 2027F |
---|---|---|---|---|---|
Revenue | 1,726.3 | 2,279.8 | 3,394.2 | 2,435.8 | 2,529.0 |
EBITDA | 485.2 | 486.6 | 744.1 | 472.5 | 479.9 |
Depreciation | (49.5) | (61.5) | (105.9) | (65.1) | (66.9) |
Amortisation | (336.4) | (348.9) | (489.5) | (280.2) | (280.2) |
Net finance cost | (12.8) | (12.4) | (47.6) | (6.9) | (3.5) |
Share of Associates | 15.7 | 17.7 | 26.1 | 18.8 | 19.7 |
Exceptionals | 101.4 | 66.2 | 0.0 | 0.0 | 0.0 |
Pretax Profit | 203.4 | 147.8 | 127.2 | 139.0 | 148.9 |
Taxation | (61.2) | (50.2) | (50.9) | (41.7) | (44.7) |
MI | (47.0) | (44.8) | (34.4) | (43.8) | (46.9) |
Net Profit | 95.3 | 52.8 | 42.0 | 53.5 | 57.3 |
Core Net Profit | (6.1) | (13.4) | 42.0 | 53.5 | 57.3 |
Balance Sheet (FYE 30 Jun, RMmn) | 2022* | 2023 | 2025E** | 2026F | 2027F |
---|---|---|---|---|---|
Property, Plant & Equip | 249.5 | 316.0 | 311.9 | 319.9 | 328.9 |
Service Concession (SC) Assets | 331.9 | 0.0 | 560.5 | 280.2 | 0.0 |
Intangibles | 397.6 | 398.7 | 398.7 | 398.7 | 398.7 |
Associates | 214.4 | 236.4 | 262.6 | 281.3 | 301.0 |
Others | 765.5 | 856.9 | 856.9 | 856.9 | 856.9 |
Non-Current Assets | 1,958.9 | 1,808.0 | 2,390.6 | 2,137.1 | 1,885.5 |
Inventories | 146.2 | 143.5 | 186.0 | 133.5 | 159.4 |
Trade and other rcvb | 495.1 | 506.7 | 706.7 | 507.2 | 526.6 |
Cash and Deposits | 389.0 | 261.3 | 346.8 | 332.8 | 284.6 |
Others | 272.5 | 241.6 | 241.6 | 241.6 | 241.6 |
Current Assets | 1,302.8 | 1,153.2 | 1,481.2 | 1,215.1 | 1,212.2 |
Total Assets | 3,261.7 | 2,961.2 | 3,871.7 | 3,352.2 | 3,097.7 |
LT Borrowings | 932.7 | 843.2 | 935.0 | 909.5 | 918.0 |
SC Obligations | 0.0 | 0.0 | 350.7 | 0.0 | 0.0 |
Others | 361.2 | 365.6 | 365.6 | 365.6 | 365.6 |
Non-Current Liabilities | 1,293.9 | 1,208.8 | 1,651.3 | 1,275.1 | 1,283.6 |
ST Borrowings | 166.5 | 156.3 | 165.0 | 160.5 | 162.0 |
Trade & other Payables | 439.5 | 545.9 | 604.4 | 400.4 | 415.7 |
Others | 406.7 | 45.6 | 395.3 | 395.3 | 45.6 |
Current Liabilities | 1,012.7 | 747.8 | 1,164.7 | 956.2 | 623.3 |
Total Liabilities | 2,306.6 | 1,956.6 | 2,816.0 | 2,231.3 | 1,907.0 |
Share Capital | 1,439.0 | 1,439.6 | 1,439.6 | 1,439.6 | 1,439.6 |
Reserves | (675.2) | (663.6) | (646.8) | (625.4) | (602.5) |
Minority Interests | 191.3 | 228.5 | 262.9 | 306.7 | 353.6 |
Equity | 955.1 | 1,004.6 | 1,055.7 | 1,120.9 | 1,190.7 |
Total Equity & Liabilities | 3,261.7 | 2,961.2 | 3,871.7 | 3,352.2 | 3,097.7 |
Cash Flow Statement (FYE 30 Jun, RMmn) | 2022* | 2023 | 2025E** | 2026F | 2027F |
---|---|---|---|---|---|
Pretax Profit | 203.4 | 147.8 | 127.2 | 139.0 | 148.9 |
Depreciation | 49.5 | 61.5 | 105.9 | 65.1 | 66.9 |
Amortisation | 336.4 | 348.9 | 489.5 | 280.2 | 280.2 |
Net Interest | 12.8 | 12.4 | 47.6 | 6.9 | 3.5 |
Associates & JCES | (15.7) | (17.7) | (26.1) | (18.8) | (19.7) |
Working Cap Changes | (60.6) | 97.5 | (184.0) | 48.0 | (30.0) |
Income Tax Paid | (61.2) | (50.2) | (50.9) | (41.7) | (44.7) |
Others | (339.8) | (385.0) | (349.7) | (350.7) | (349.7) |
CF from Operations | 124.9 | 215.1 | 159.6 | 128.1 | 55.6 |
Capex | (49.2) | (117.4) | (101.8) | (73.1) | (75.9) |
Interest Received | 3.7 | 8.8 | 78.4 | 69.4 | 66.6 |
Others | (5.1) | 42.0 | 0.0 | 0.0 | 0.0 |
CF from Investing | (50.7) | (66.6) | (23.4) | (3.7) | (9.3) |
Dividends | (19.8) | (77.0) | (25.2) | (32.1) | (34.4) |
Net Change in Debt | 54.5 | (120.8) | 100.5 | (30.0) | 10.0 |
Interest Expense | (75.3) | (72.2) | (126.0) | (76.3) | (70.1) |
Others | 8.4 | (22.4) | 0.0 | 0.0 | 0.0 |
CF from Financing | (32.1) | (292.4) | (50.6) | (138.4) | (94.5) |
Net Cash Flow | 42.1 | (143.8) | 85.5 | (14.0) | (48.2) |
Beginning Cash | 201.9 | 245.4 | 261.3 | 346.8 | 332.8 |
Exchange Rates | 1.4 | (2.9) | 0.0 | 0.0 | 0.0 |
Ending Cash | 245.4 | 98.7 | 346.8 | 332.8 | 284.6 |
Recommendation Guidelines
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
★★★★★ (≥80%): Displayed market leading capabilities in integrating ESG factors in all aspects of operations, management and future directions. | +5% premium to target price |
★★★★ (60-79%): Above adequate integration of ESG factors into most aspects of operations, management and future directions. | +3% premium to target price |
★★★ (40-59%): Adequate integration of ESG factors into operations, management and future directions. | No changes to target price |
★★ (20-39%): Have some integration of ESG factors in operations and management but are insufficient. | -3% discount to target price |
★ (<20%): Minimal or no integration of ESG factors in operations and management. | -5% discount to target price |
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 05, 2025, the analyst, Hafriz Hezry, who prepared this report, has interest in the following securities covered in this report: (a) nil