Ranhill's valuation running ahead of fundamentals – Analysts
KUALA LUMPUR: The valuation of Ranhill Utilities Bhd is running ahead of its fundamentals, said BIMB Securities, as it expects the Johor water utilities operator’s core earnings to decline 27.6 per cent year-on-year in the financial year ending June 30, 2027 (FY27F).
Analysts have noted that the valuation of Ranhill Utilities Bhd is currently outpacing its fundamentals, with BIMB Securities downgrading the company to "Sell" from "Hold." This downgrade is based on expectations that Ranhill's core earnings will decline by 27.6% year-on-year in the financial year ending June 30, 2027. Despite this, BIMB Securities has increased its target price for Ranhill to RM2.39, up from RM1.94, noting that the group trades at a substantial premium of 30.1 times price-earnings ratio (PER) compared to its historical mean trailing PER of 17.2 times.
MBSB Research also downgraded Ranhill to "Neutral" from "Buy" with a higher sum-of-the-parts derived target price of RM2.84, from RM2.56, citing that much of the positive sentiment has already been reflected in the share price following a recent rally. Both firms remain optimistic about Ranhill's long-term prospects driven by rising water demand in Johor, supported by data centre investments, industrial expansion, and economic growth in the Johor-Singapore SEZ and Special Financial Zone.
However, analysts caution that the highly regulated nature of the water sector may limit the extent of economic benefits Ranhill can derive from increased demand.
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