Ranhill may have a bullish breakout

Background

The Ranhill Group is involved in the energy, power, water and infrastructure businesses.

It currently has on-going oil and gas explorations in Indonesia and the Philippines. Upon successful exploration, this sector is expected to contribute positively to the Group’s results in the future.

Its investments in the power and water concession businesses have ensured recurring income from these sectors. The recent power and water tariff adjustments will also have a positive result to the Group’s power and water businesses.

Recent Financial Results

Ranhill's topline & bottomline have improved considerably in the last 2 quarters i.e. 1H2007. For the latest quarter i.e. QE31/12/2006, Ranhill reported a net profit of RM27.6 million on a turnover of RM417.6 million. In the QE31/3/2006, Ranhill reported a net loss of RM49 million due to certain acquisition costs associated with a proposed power plant acquisition.

Valuation

If Ranhill's current performance can be maintained, its EPS for FY2007 could be about 22 sen. Based on this & its closing price of RM1.42 as at Feb 16, Ranhill is now trading at a PE of about 6.5 times.

Technical Outlook

Ranhill share price may have broken above its long-term downtrend line, which stretched back to 2003. From a high of RM3.30 then, Ranhill share price slid all the way to a low of RM0.70 in December 2005. If Ranhill can stay above the breakout level of RM1.40, Ranhill could be on the way to higher price level.

Chart 1: Ranhill's daily chart from Jun 2003 until Feb 16, 2007

Chart 2: Ranhill's daily chart from Jan 2006 to Feb 16, 2007

Conclusion

Based on improving fundamentals & potentially bullish breakout, Ranhill could be a good buy for the medium-term.