Ranhill set to ride Johor's data centre, industrial boom

KUALA LUMPUR: Ranhill Utilities Bhd is well positioned to benefit from the restructuring of Johor's water sector, supported by higher tariffs and rising demand from the state's data centre and industrial boom.

Hong Leong Investment Bank Bhd (HLIB) said the August 2025 tariff hike in Johor had materially strengthened the earnings outlook for Ranhill SAJ Sdn Bhd, its water concessionaire in the state.

"Together with rising water demand, we expect both tariff and volume growth to drive sustainable earnings growth, while higher tariff collection supports further water infrastructure investment," it said in a note.

HLIB said Johor's rapid expansion in the data centre and industrial sectors was also expected to create a structural growth opportunity for Ranhill SAJ through higher water consumption.

The firm noted that Johor has 8.5 gigawatts (GW) of incoming data centre capacity on top of 1.1GW of live information technology power capacity.

"This is broadly in line with Tenaga Nasional Bhd's guidance that a large portion of its 8.35GW signed Electricity Supply Agreement commitments are located in the state, with another 5GW expected to follow.

"We estimate total data centre water requirements of about 400 million litres per day, providing a structural volume-growth opportunity for Ranhill SAJ.

"Continued industrialisation and the Johor-Singapore Special Economic Zone should further support long-term water demand growth," it said.

HLIB said Ranhill was also expected to undertake RM3.5 billion worth of water treatment plant capital expenditure under the Integrated Water Plan structure, providing further earnings upside.

Despite these catalysts, the firm said Ranhill remained underappreciated, trading at just 11.9 times its 2027 price-to-earnings (P/E) ratio.

"We derived a fair value of RM4.20, based on its peers' average P/E multiple of 18 times 2027 earnings," it added.