Ranhill goes private to keep growing

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Malaysia’s Ranhill has completed its delisting, but still has plans for expansion. It may yet re-appear on another stock exchange

Ranhill Corporation, the parent company of Ranhill Utilities – which develops and operates water and wastewater infrastructure in Malaysia and across Asia – completed its delisting from the Kuala Lumpur stock exchange in mid-November.

 
The management buy-out which gave rise to the delisting was spearheaded by group president and CEO Hamdan Mohamad, along with Cheval Infrastructure, a regional private equity fund. The offer of MYR0.90 per share constituted a 20% premium over the 6-month VWAP of the shares when the deal was announced in August, valuing the company’s equity at MYR538 million ($179 million).
 
The group’s share price had been weighed down by concerns about its oil and gas business, and in particular its exposure to Sudan. The water side of the business – the environment division – has rosier prospects.
 
Water, along with power and engineering consultancy, will be one of Ranhill’s focus areas in the future as it seeks to rebuild value, Ahmad Zahdi, CEO of Ranhill Utilities, explained to GWI. The water business delivered revenues of MYR723 million ($226 million) in 2010, out of total group revenues of MYR2.12 billion ($663 million). This number looks set to grow in future.
 
Ranhill Water Technologies, which holds all the group’s international water assets, had already attracted the attention of private equity investors. In 2009, Londonbased Aqua Resources took a 45% stake for $12.6 million, and made a follow-up investment of $2.3 million in January 2011. It has committed to injecting a further $2.25 million into the venture by February 2012.
 
RWT has an investment portfolio of five BOT projects in mainland China and two projects in Thailand combining water, wastewater and water reuse, in addition to a continuous flow of EPC contracts. The company is currently pursuing eight further targets in China, and is expecting to virtually double its revenue stream this year versus 2009 (see chart).
 
Ranhill Utilities is also looking for growth in India, where it took a 40% stake in a JV with JUSCO for a 25-year BOT water supply project in Haldia, West Bengal in 2008 (RWT was the EPC contractor). Thailand – which was the initial focus of the company’s international expansion plans – has proven difficult to conquer, however.
 
Meanwhile, the company’s water supply operations in Johor in the south of Malaysia provide prospects for steady, if not spectacular growth. Demand for water is rising at 2.5% a year and the company secured a tariff increase of 12.5% in 2010. The next tariff review is due in 2013.
 
Instead of a portfolio of concessions in Malaysia, Ranhill has built up an MYR50 million-a-year ($16 million) business in service contracts. Zahdi is still hopeful that Ranhill can develop more local business. “We expect to announce several new contracts in 2012 or 2013,” he told us.
 
Ranhill may yet reappear in the public equity market. Aqua Resources has floated the idea of listing RWT on the Hong Kong stock exchange, much like Salcon Asia and InterChina, which are also considering listing their portfolios of Chinese water projects. No timeframe has yet been set as yet, though, and more projects will be needed to beef up the current 240,000m3/d portfolio to a combined capacity closer to 1 million m3/d ahead of any IPO.