PETALING JAYA: The decision on Ranhill Utilities Bhd
’s led consortium Djuanda source-to-tap water project “Initiator Status” in Indonesia is expected to be delivered by the end of the year, according to TA Research.
Based on Ranhill’s latest virtual analyst briefing, the consortium has submitted feasibility studies to Indonesia’s Public Works and Public Housing (PUPR) Ministry and is currently waiting for the submission’s acceptance.
The company’s management said “PUPR would then call for a tender exercise, and the decision on the outcome of the project is expected to be delivered by the end of the year”, said TA Research.
“Due to the high capital commitment expected for the project, about US$900mil (RM4.18bil), Ranhill plans to reduce its stake in the consortium to around 50% (from 75% during the feasibility studies) if the group proceeds with the project.
“The project will involve minimal collection risk as Ranhill will be collecting the bills directly from PUPR.
“Additionally, based on the memorandum of understanding signed earlier, the tariff will be increased every three years,” TA Research added.
Another key takeaway from the briefing is the lower electricity cost for its unit, Ranhill SAJ Sdn Bhd, in the second half of the financial year 2023 (2H23).
For July 1 to Dec 31, 2023, all water and sewerage operators, including Ranhill SAJ, will be charged an imbalance cost past-through (ICPT) surcharge of 3.7 sen per kWh instead of 20 sen per kWh in 1H23, leading to improved profitability for the group, said TA Research.
Ranhill will have to resubmit the Corporate Green Power Programme (CGPP) application, the research house pointed out.
The group submitted applications for two 30MW quotas under the CGPP, but they were not approved due to issues with its documents.
TA Research said Ranhill intends to resubmit its application soon and added that the CGPP applications were on behalf of Ranhill SAJ and Indah Water Konsortium Sdn Bhd.
In light of the above, the research house has raised its FY23 to FY25 earnings forecasts for Ranhill by 6% to 10%.
This is reflective of the lower electricity costs for Ranhill SAJ.
It also maintained a “buy” call on the stock with a higher target price of 70 sen per share from 67 sen previously, based on sum-of-parts valuation.
Ranhill Utilities’ primary interests are in the environment and power sectors.
It provides water supply services, operates water and wastewater treatment plants, and provides specialised services for water utility assets.
