Ranhill Utilities Bhd ("RUBhd") is involved in the collection and treatment of raw water and the distribution of treated water to consumers in the State of Johor, commencing from 1 March 2000 for a period of 30 years. The water supply concession is held by RUBhd's wholly-owned subsidiary, SAJ Holdings Sdn Bhd ("SAJH"). RUBhd is, in turn, a 70%-owned subsidiary of Ranhill Bhd.
Recent Financial Results
RUBhd's financial performance has been satisfactory for the past 6 quarters. For QE31/12/2007, RUBhd's net profit increased by 31.9% q-o-q or 41.1% y-o-y to RM68.7 million, while its turnover was marginally lower at RM157 million. The big jump in net profit is due mainly to lower effective tax rate (of -2% as compared to 12% for QE31/12/2006). As you can see, its pre-tax profit has declined by 2.2% q-o-q to RM67.4 million, but was 8.8% higher than the same quarter's net profit last year.
Valuation
RUBhd (closed at RM2.93 yesterday) is now trading at a PE of 3.9 times (its last 4-quarters' EPS of 74.6 sen) or at a P/Book of 0.66 times (based on Net Asset per share of RM4.40 as at 31/12/2007). At these multiples, the stock is very attractive.
Technical Outlook
The chart on RUBhd share price has been consolidating in a big ascending triangle. The stock would have a bullish breakout if it can surpass the RM3.00 resistance.
Chart: RUBhd's weekly chart as at May 6, 2008 (courtesy of Quickcharts)
Other matter
There has been persistent rumor that RUBhd might be taken private by its shareholders (go here). The share price pattern is consistent with steady accumulation, indicating that the rumor may not be totally unfounded.
Conclusion
Based on attractive valuation, RUBhd is a good BUY for the medium-term. If the stock can surpass the RM3.00 level with big volume, it could be a trading BUY.
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