RHB Research has Maintained a “Buy’ recommendation for Ranhill Utilities Bhd with an SOP-based target price of RM0.76, 55% upside, and 5% yield.
It said that Ranhill Utilities via its subsidiary, Ranhill Water Services (RWS), had accepted a letter of acceptance from Pengurusan Aset Air Berhad (PAAB). RHB believes the contract awarded worth MYR61.5million, with works to be undertaken from 29 Mar 2022 to 28 Mar 2024, will contribute positively to overall earnings.
The research house adds that the 11.5x FY22F P/E is trading below its 5-year historical mean of 20.8x, indicating an undemanding valuation
It said that the main scope of work, amongst others, includes: Replacement of existing distribution and communication pipes, the establishment of new District Metering Areas (DMAs), installation of pressure-reducing valves (PRV) system and flowmeters at reservoir outlet, and testing and commissioning works. These works will take place in the district of Kota Bharu Timur, Machang, Tanah Merah, and Kuala Krai covering a total length of 103km for pipe replacement works.
RHB said that it foresee’s minimal execution risks by RWS as it has previously secured two of PAAB’s pipe replacement contracts through a competitive open tender exercise in 2019.
“Apart from that, RWS has been actively involved in Kelantan’s water supply projects, and since 2012, it has secured three non-revenue water (NRW) management contracts from Air Kelantan SB (AKSB). As such, this latest win solidifies RWS’ presence in Kelantan and strengthen RAHH’s credentials as a holistic NRW management specialist in the country,” the stockbroking house said.
