The affirmed ratings of Ranhill Berhad (Ranhill) reflect the company’s competitive position in the engineering and construction industry; strong order book; expansion into the water and power industries; and a tight underlying issue structure. The ratings, however, are moderated by the company’s weak liquidity position.

The Ranhill Group is mainly involved in the engineering, procurement, construction management, project management, and operations and maintenance businesses, particularly in the oil & gas, infrastructure and utilities sub-sectors. To date, the Group’s total ongoing projects amounted to over RM1.6 billion, with an additional RM1.0 billion at the bidding stage. Some of the projects currently undertaken by the Group include the Serdang Hospital, Muar Bypass, SAJH Capital Works, Semangar Water Supply Scheme in Johor and the Double-tracking Railway Line from Rawang to Bidor.

As part of its diversification strategy, Ranhill is diversifying into asset based industries in order to generate a stable and recurrent income, mitigating the cyclical nature of the construction business. On 29 December 2003, Ranhill completed the acquisition from TIME Engineering Berhad of 40% equity interest in Powertron Resources Berhad (PRSB) and 60% equity interest in Penjanaan EPE-TIME Sdn Bhd. Subsequently, Ranhill will inject this new acquired asset to EPE Power Corporation Berhad (EPE), which will result in Ranhill holding 90.06% of the equity in EPE. PRSB, a 70% subsidiary of EPE, owns and operates a 120MW open-cycle gas-fired power plant in Sabah thus marking Ranhill’s entry into the power generation business.

In addition, Ranhill had made an offer to acquire the remaining 70% stake in its sister company, Ranhill Utilities Berhad, which holds a 30-year concession to provide water supply services in the state of Johor via its wholly owned subsidiary, SAJ Holdings Sdn Bhd.

Revenue for FYE6/2003 surged by 24% to RM770.6 million, driven by Ranhill’s engineering, procurement and construction (EPC) activities (79.7%). Operating profit margin, however, slipped into single digit due to a disproportionate increase in operating costs.

Ranhill’s foray into the asset based businesses will enhance its competitive position in the local and overseas markets. Moving forward, the main business activities, namely, engineering, procurement and construction, water and power generation are expected to contribute positively to the Group’s earnings. Upon the consolidation of RUB into the Group, the latter’s debt servicing capacity is also expected to significantly improve.