Ranhill under pressure on first trading day

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This article first appeared in The Edge Financial Daily, on March 17, 2016.


KUALA LUMPUR: Utility company Ranhill Holdings Bhd’s shares faced persistent selling pressure on the first trading day. It slipped to an intraday low of RM1 — nearly 17% below its retail public offer price of RM1.20.


The stock closed at RM1.01 with 48 million shares changing hands.

It seems a lacklustre debut for Bursa Malaysia’s biggest initial public offering (IPO) so far this year.  Ranhill Holdings president and chief executive Tan Sri Hamdan Mohamad, in commenting on the stock’s performance after it opened 10 sen lower earlier yesterday, said that market sentiment is now soft.

“But hopefully, investors [will] come back,” said Hamdan who controls a 33.52% stake in Ranhill.

On its operations, Hamdan said Ranhill Holdings is looking to triple the capacity of its industrial wastewater business in China to 1,000 million litres per day (MLD) in three to five years, while aiming to increase its power plant capacity size to 1,000MW from 380MW currently.

It is an aggressive target that would require heavy capital expenditure (capex) in the next five years. But Ranhill Holdings chairman Tan Sri Azman Yahya said that its wastewater business is one that requires partnership, so the capex burden on Ranhill is reduced.

“The issue of funding is important. But in the case of our [wastewater] business, its expertise lies in design, manufacturing and commissioning. And we can always find equity partners for a treatment plant in China,” said Azman.

Ranhill Holdings initially targeted to raise RM637.5 million from its IPO after the reverse takeover of Symphony House Bhd at RM1.70 per share. The retail portion was undersubscribed. Subsequently, the offer price was reduced to RM1.20.

About 70% of its IPO proceeds will be used to repay bank borrowings, and 18% for working capital.

“And we [just] listed. So, previously (before the IPO), there was never an issue with sourcing for funding or looking for partners,” said Azman.

Hamdan said that Ranhill Holdings’ industrial wastewater business in China is the only Malaysian company in the business.

Other Malaysian companies deal with either potable water or municipal wastewater business. “And those businesses are already controlled by state-owned enterprises there,” he said.

Given China’s recent stringent requirements on environmental control, Ranhill Holdings’ industrial wastewater business is in a growing market, said Hamdan. Currently the business makes up about 10% to 15% of the group revenue, he said.

While its water treatment operation in Johor is still the biggest earnings contributor, Hamdan said he hopes the industrial wastewater and energy businesses will be the growth engine of Ranhill Holdings.

Currently, its industrial wastewater segment in China has a capacity of 340MLD in four provinces. Hamdan said Ranhill Holdings is also working with a company  in Thailand to tap into the Indochina markets.

On its electricity operations, Ranhill Holdings is still positive on Sabah, where it has two 190MW combined cycle gas turbine plants there. Given the state’s development needs, Hamdan sees potential in powering up the east coast of Sabah.

“In Sandakan alone, it needs at least 300MW now. We are looking at Sandakan and Lahad Datu (as potential expansion locations.”