PETALING JAYA: Ranhill Utilities Bhd
’s subsidiary Ranhill Worley Sdn Bhd scores another big win with its US$50mil (RM210mil) contract award to perform detailed engineering design (Ded) from Saipem SpA of Italy, says MIDF Research.
The research house noted the latest contract almost doubles Ranhill Worley’s current order book of RM265mil and expands Ranhill’s overall services division’s order book by 24% to RM1.07bil.
“The outstanding order book now is equivalent to 3.7 times the services division’s annual revenue, while the tender book stands at RM1.5bil,” MIDF Research said in its note to clients.
The research house expects contribution from the Ded project to be almost equal for financial year 2023 (FY23) and FY24.
Based on a conservative profit after tax margin of about 10% and based on Ranhill’s 51% stake in Ranhill Worley, MIDF Research estimates that around RM5mil to RM6mil annual earnings contribution from the project for the next two years, accounting for 11% in FY23 and 13% in FY24 respectively.
Pending further clarity from Ranhill’s management, the research house also sees upside potential to its current earnings projections.
Furthermore, Ranhill has been delivering a slew of positive news since the start of the year such as the implementation of a long overdue water tariff hike of 6% to 11% for the non-domestic sector, new contract 100MW combined-cycle gas turbine power plant in Sabah, cash boost from its RM142mil non-revenue water grant award and reacceleration in cash dividends with the recent announcement of a two sen per share dividend.
“These are positive catalysts, which are expected to drive a significant turnaround in earnings and dividends going forward, in our opinion,” added MIDF Research.
The research house has maintained a “buy” on the stock with an unchanged target price of 70 sen.
“This latest development is positive, reinforcing the services division’s earnings prospects over the next two years.
“Broadly, we continue to like Ranhill for its earnings expansion potential,” it added.
