Decent Dividend Yield

Malaysian-listed utility company, Ranhill Holdings Berhad’s share price did not perform well since its IPO. It has fallen from its IPO price of RM1.20 per share to RM0.825 (closing as of 3 May 2017).  Thus far, it had paid 3 interim dividends and shall be paying another final dividend in the month of June 2017. Given its reasonable amount of dividend payments, would this warrant a re-rating of its stock price?

Continue reading “Decent Dividend Yield”

Where Is The Dividend?

Malaysia-based utilities player, Ranhill Holdings Berhad (Ranhill) has recently announced its latest Q2FY16 result on 5 August 2016. As per the announcement, there was no mention of any interim dividend to be declared. Ranhill has been trading sideways / range bound as there is no major positive catalyst coming out from this company. As the Company is in the utilities sector, dividend yield is an important investment merit for the investors. It is not unusual that investors are anxiously waiting for this Company to declare its maiden dividend since its successful listing on Bursa early this year.

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As per the notes to the latest quarterly result, the Company is in the midst of sorting out its guarantee arrangement with its Guarantors with respect to its existing Sukuk programme. We believe that once this matter has been sorted out, this may potentially facilitate future dividend payments by the Company.

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Assuming the Company is able to declare dividends for FY16, the following is a high-level desktop estimate of projected dividend for the Company:

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Our key assumptions:

  1. Assuming a dividend payout ratio of between 50% – 70%
  2. Q3 and Q4 FY16 are based on Q2 FY16 PATMI (excluding the effects of negative goodwill)

Whilst investors are waiting for the maiden dividend to be declared by the Company, the comforting point is that Ranhill has the backing from institutional investor such as Lembaga Tabung Haji (LTH). As shown below, LTH has been gradually accumulating its position in the Company:

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LTH currently holds 6.592% of total shareholding in Ranhill.

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Finding Yield

Quick update on Ranhill Holdings Berhad (a Malaysian conglomerate with interests in power and environment sectors). It has since dropped to RM0.965 from its initial IPO price of RM1.20 per share.

At current price of RM0.965, Ranhill may be trading at implied forward dividend yield of approximately 6.5%, which is a decent yield supported by a stable cashflow profile from its long term concessions. Our desktop analysis is summarised as follows:

Ranhilll

Note on projections & assumptions:

  1. Normalised PAT for FY15 to exclude non-recurring costs relating to initial public offering / RTO exercises;
  2. Assume a lower revenue y-o-y growth rate and PAT margin rate for FY16

*Update*: investors should take note of the on-going negotiation between the Company and its Corporate Guarantors relating to its existing Sukuk programme (shown below). Once the proposed debt-to-equity ratio / covenant has been approved, hopefully we will see more light in terms of future dividend payments by the Company.

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DISCLAIMER: ALL ARTICLES CONTAINED IN THIS SITE ARE FOR INFORMATION AND ILLUSTRATIVE PURPOSES ONLY AND DOES NOT PURPORT TO SHOW ACTUAL RESULTS. IT IS NOT, AND SHOULD NOT BE REGARDED AS INVESTMENT ADVICE OR AS A RECOMMENDATION REGARDING ANY PARTICULAR SECURITY OR COURSE OF ACTION. SOURCES USED IN THIS SITE HAVE NOT BEEN INDEPENDENTLY VERIFIED FOR ACCURACY. YOU SHOULD SEEK INDEPENDENT AND PROFESSIONAL INVESTMENT ADVICE IN REGARD TO YOUR INVESTMENT DECISIONS. THE AUTHOR MAY HOLD POSITIONS IN THE SECURITIES MENTIONED ABOVE.

Institutional Strength

Lately, the Malaysian hajj pilgrims fund board (a significant institutional investor), Lembaga Tabung Haji (“LTH”) has been increasing its position in Ranhill Holdings Berhad (“Ranhill”), as shown below:

Ranhill_may 16.pngInsiders’ purchases / transactions by substantial shareholders, e.g LTH’s recent purchases will provide price support to Ranhill from further downward pressure due to prevailing negative market conditions. We believe that LTH is currently attracted to Ranhill’s expected dividend yield of in excess of 6.0%.

Technically Speaking

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Given its attractive dividend yield, we think Ranhill is currently in “oversold” position (shown in RSI, William%R and CCI), as shown above, as well as it has touched the lower bound of the Bollinger Band. Potentially, one may consider RM1.15 as the immediate profit target price, should Ranhill bounce upwards.

 

DISCLAIMER: ALL ARTICLES CONTAINED IN THIS SITE ARE FOR INFORMATION AND ILLUSTRATIVE PURPOSES ONLY AND DOES NOT PURPORT TO SHOW ACTUAL RESULTS. IT IS NOT, AND SHOULD NOT BE REGARDED AS INVESTMENT ADVICE OR AS A RECOMMENDATION REGARDING ANY PARTICULAR SECURITY OR COURSE OF ACTION. SOURCES USED IN THIS SITE HAVE NOT BEEN INDEPENDENTLY VERIFIED FOR ACCURACY. YOU SHOULD SEEK INDEPENDENT AND PROFESSIONAL INVESTMENT ADVICE IN REGARD TO YOUR INVESTMENT DECISIONS. THE AUTHOR MAY HOLD POSITIONS IN THE SECURITIES MENTIONED ABOVE.

Believing The IPO Story

Newly-listed Ranhill Holdings Berhad (“Ranhill”) closed at RM1.01 on its debut day (down from its IPO price of RM1.20 per share). Initial IPO price was set at RM1.70 per share but was subsequently revised down to RM1.20 per share. http://www.dealstreetasia.com/stories/malaysia-ranhill-makes-soft-market-debut-optimistic-of-prospects-34375/

Possible reasons that could explain such poor debut:

Potential Upside?

Are we going through another failed IPO? I beg to differ in this case, as it is backed by stable cashflows & long term power & water concession assets. Hence, we should assess the counter based on its potential dividend yield. Yield is a very important consideration considering there is a prevailing global trend towards negative yield / interest rate. The Star reports : “At its price of RM1.01, Ranhill’s shares are now trading at a projected dividend yield of between 6.5% and 7.7% for financial year 2016 (FY16).”  http://www.thestar.com.my/business/business-news/2016/03/17/ranhill-in-lacklustre-debut/

Public Research has a target fair value of RM1.25 (revised) pegged to this counter. http://www.thesundaily.my/news/1722210

We also saw some support coming from some institutional buyers (e.g LTH) which have been accumulating the counter:

No Announcement Date Company Title
1 28 Mar 2016 RANHILL HOLDINGS BERHAD Changes in Sub. S-hldr’s Int. (29B) – LEMBAGA TABUNG HAJI

2 25 Mar 2016 RANHILL HOLDINGS BERHAD Changes in Sub. S-hldr’s Int. (29B) – LEMBAGA TABUNG HAJI

3 25 Mar 2016 RANHILL HOLDINGS BERHAD Changes in Sub. S-hldr’s Int. (29B) – LEMBAGA TABUNG HAJI

Would the rebound continue?

As of today, Ranhill rebounded from its low of RM1.01 to RM1.10 (current). Personally, the dividend yield range of 5.0% – 5.5% would cap the maximum price range of Ranhill. Assuming a forecast dividend of RM0.065 /share, we are looking at a potential range of RM1.18 – RM1.30

Another important consideration is that there could be potential volatility in the share price of Ranhill once the lockup arrangements with selling shareholders / investors expire 180 days from the listing date (16 March 2016) (http://www.bursamalaysia.com/market/listed-companies/company-announcements/4963809)

DISCLAIMER: THIS SITE IS FOR INFORMATION AND ILLUSTRATIVE PURPOSES ONLY AND DOES NOT PURPORT TO SHOW ACTUAL RESULTS. IT IS NOT, AND SHOULD NOT BE REGARDED AS INVESTMENT ADVICE OR AS A RECOMMENDATION REGARDING ANY PARTICULAR SECURITY OR COURSE OF ACTION. SOURCES USED IN THIS SITE HAVE NOT BEEN INDEPENDENTLY VERIFIED FOR ACCURACY. YOU SHOULD SEEK INDEPENDENT AND PROFESSIONAL INVESTMENT ADVICE IN REGARD TO YOUR INVESTMENT DECISIONS. THE AUTHOR MAY HOLD POSITIONS IN THE SECURITIES MENTIONED ABOVE.