Ranhill Baby

simon_alibaba said...
do you have any call on Ranhill Utilities or RUBHD?


What a nice name... Ranhill ... sounds so British. Ranhill Utilities is not on any brokers' watch list, i.e. no coverage, i.e. nobody will touch the stock. Let's be fair and have a view on Ranhill Utilities. Its 100% subsidiary, SAH Holdings holds the water supply concession in Johor - some hoo-hah with the state government to restructure the concession. The project IRR is about 18%.

The only stock that research houses cover within the umbrella of Ranhill is Ranhill Berhad (the other listed counters are Ranhill Power and Ranhill Utilities). Surprise, surprise, the only exciting counter of the 3 is Ranhill Utilities. The Ranhill Power is also good but is plagued with land acquisition issues in Sabah. Both the power and unitilities units contribute nearly 50% of turnover for Ranhill Berhad. At operating profit level, the figure is even more ridiculous as the two account for 95% of Ranhill Berhad's profit.

So, the first thing to do, throw Ranhill Berhad out of your buy list. Of the other two, Ranhill Utilities is a better bet, but because there is scant coverage, it is difficult to move the stock, you will have to hold and wait because the company is controlled by Ranhill Berhad - so RB have not much incentive to improve the share price of RUB, RB would probably use the balance sheet and cash flow of RUB to finance their expansion (not a good thing). RB has ventured to very high risk areas for their construction projects, e.g. Libya... OMG.

Looks like Ranhill group needs a good advisory team... quick. Sell down stake in RUB, let RUB fund its own expansion into water projects on its own balance sheet. RB should refinance its own projects and cut ties with RUB and RPower. Right now, the best any of the companies can do is what the weakest link shows. Nobody is willing to embrace the stronger units.

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