Bulk of Ranhill’s latest FPSO contract win to be captured in FY23
KUCHING: The bulk of Ranhill Utilities Bhd’s (Ranhill) latest floating production, storage and offloading vessel (FPSO) contract win is expected to be captured in financial year 2023 (FY23).
To note, Ranhill’s board of directors recently announced that by a signed contract effective November 4, 2022 from Sembcorp Marine Integrated Yard Pte Ltd (Sembcorp Marine) to Ranhill Worley Sdn Bhd (Ranhill Worley), Ranhill Worley was awarded a contract to perform detail design engineering for detail design engineering services for P-82 FPSO; for Brazilian state-owned oil and gas producer Petroleo Brasileiro SA (Petrobras).
“We estimate Ranhill Worley’s order book to expand to RM278 million (slightly more than a year’s worth of Ranhill Worley’s annual revenue), of which the bulk of it comprises this latest project,” the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) said.
“The bulk of the project is expected to be captured in FY23. We estimate around RM106m revenue contribution in FY23 and another RM17 million contribution in FY24F.”
At estimated project margin of around nine per cent to 10 per cent and based on Ranhill’s 51 per cent stake in Ranhill Worley, MIDF Research estimated the project to contribute RM4.9 million to Ranhill’s net profit, or 11 per cent of FY23 earnings.
“As this forms part of our order book replenishment assumption for Ranhill Worley, we keep our projections unchanged at this juncture.
“Nonetheless, this is a positive development in sustaining Ranhill Worley’s contribution to the group.”
On another note, having seen significant retracement in the past year, MIDF Research opined Ranhill’s share price is reaching an inflection point with the contraction in Ranhill SAJ Sdn Bhd’s (RSAJ) earnings from a delay in tariff hike well priced in and reflected in consensus earnings revisions. In contrast, the research arm anticipated several key catalysts to materialise in FY23.
“A tariff hike for RSAJ in which the Federal Government had already approved an average 25sen per cubic metre tariff hike for the non-domestic sector and is currently pending implementation by the Johor State, commissioning of Ranhill’s LSS4 project by September 2023 and completion of the Sabah grid upgrade in FY23 and commencement of SK Nexilis’ copper foil manufacturing plant in KKIP, which will increase load and improve dispatch for RP1 and RP2. MIDF Research recapped that the Federal Government had already approved an average 25sen per cubic metre tariff hike for the non-domestic sector nationwide.
“From our recent visit, Ranhill expects a 4.6 per cent impact to revenue from the hike (which is within our earlier estimated three per cent to five per cent range).
“However, the impact to bottomline could be much larger than our earlier expectation as most of the increase will likely flow down to bottomline.
“This is given that RSAJ is currently operating at well below its regulated nine per cent profit after tax (PAT) margin.”
In a base case scenario, the research arm expected Ranhill’s annual earnings to return to the RM50 million to RM60 million level once the tariff hike is implemented.
“It is currently pending the final approval and implementation by the Johor State Government, whereby we expect further clarity on this post-General Elections and post-Johor State Elections.”