Results take a back seat

Given the possible recurrence of NRW incentive in FY24, Ranhill’s 1Q24 result was in line with our/consensus expectation. We maintain a SELL rating and MYR0.90 TP (unchanged, SOP-based) given current rich valuations. Nevertheless, fundamentals will likely take a backseat for now following the trading suspension of both Ranhill and YTL Power (YTLP, HOLD, CP: MYR4.60, TP: MYR5.20) today.

In line, given possible NRW incentive in 4Q24

Ranhill’s 1Q24 net profit of MYR10m (-7% YoY, -58% QoQ) represents 16%/21% of our/consensus full-year forecasts respectively. The sequential earnings decline was due to a base effect (recall 80%-subsidiary RSAJ recognised MYR86m of NRW incentive in 4Q23). We assume a recurrence of similar level of NRW incentive for FY24. No cash dividend was declared, but a share dividend of 0.5 share for every 100 share was declared in early- May 2024.

Services segment outperform

In 1Q24, the Environment segment saw sequentially lower PAT as the domestic tariff hike in Feb 2024 was insufficient to offset the absence of the NRW incentive. The Energy segment was back in the black in 1Q24 (after posting losses in 4Q23), possibly from lower expenses. The Services segment saw sequentially lower PAT due to a high 4Q23 base (lower billings at Ranhill Bersekutu and Ranhill Technologies). Nevertheless, this still represents an elevated level (1Q24 Services PAT doubled YoY).

Maintaining forecasts

Our earnings forecasts and MYR0.90 TP (derived from a sum-of-parts with RSAJ and the power plants valued on DCF) are unchanged. All eyes will now be on the potential corporate action possibly involving Ranhill and YTL Power to be announced today. As at Apr 2024, the Chairman/CEO owns a gross 31.4% stake in Ranhill, while YTL Power holds a gross 21.8% stake.

Source: Maybank Research - 28 May 2024