JAKS Resources Bhd
(April 14, 89.5 sen)
Not rated, fair value of RM2: We note that JAKS has primarily been identified with the water sector, including the construction of water infrastructure projects and the manufacture of steel pipes and steel hollow sections.
Although the water business is still important, we believe JAKS has been very busy over the last year spreading its wings to property and power.
We believe JAKS' outlook is about to change for the better, given three major positive developments since March, which in our view will improve its financial position from FY10/2010.
These include the joint development agreement by 51%-subsidiary Jaks Island Circle (JIC) and Star Publications to develop a piece of land in Petaling Jaya, the letter of award for construction of the Paya Peda Dam in Besut, Terengganu for a total contract sum of RM333 million and memoranda of agreement with various Vietnam authorities for a 2x600 MW coal-fired power plant in Hai Duong province near Hanoi.
We believe the power purchase agreement (PPA) has also been confirmed with Electricity of Viet Nam (EVN), which is Vietnam's national power utility. As the first foreign-owned independent power producer (IPP) in Vietnam, and upon the successful completion of this power plant in FY15, we believe JAKS will be in the running for other IPP projects there. From this first IPP, we estimate an incremental net profit of around RM52.7 million in FY16, or five times of our projected FY10/2010 net profit of RM11.1 million.
We believe the market has yet to fully reflect JAKS' power plant venture in Vietnam, which alone is worth RM676.8 million or RM1.54/share based on discounted cash flow (DCF). We thus estimate a sum-of-parts (SOP) fair value for JAKS of RM2, which implies a huge upside of 141% from current levels.
Our SOP valuation includes JAKS' construction, manufacturing and trading businesses at 10 times FY10/10 price-earnings ratio (PER), rental income from UTAR at DCF, land development in Section 13, Petaling Jaya at revised net asset value (RNAV) and power plant venture in Vietnam at DCF.- RHB Research Institute, April 14
This article appeared in The Edge Financial Daily, April 15, 2010.
(April 14, 89.5 sen)
Not rated, fair value of RM2: We note that JAKS has primarily been identified with the water sector, including the construction of water infrastructure projects and the manufacture of steel pipes and steel hollow sections.
Although the water business is still important, we believe JAKS has been very busy over the last year spreading its wings to property and power.
We believe JAKS' outlook is about to change for the better, given three major positive developments since March, which in our view will improve its financial position from FY10/2010.
These include the joint development agreement by 51%-subsidiary Jaks Island Circle (JIC) and Star Publications to develop a piece of land in Petaling Jaya, the letter of award for construction of the Paya Peda Dam in Besut, Terengganu for a total contract sum of RM333 million and memoranda of agreement with various Vietnam authorities for a 2x600 MW coal-fired power plant in Hai Duong province near Hanoi.
We believe the power purchase agreement (PPA) has also been confirmed with Electricity of Viet Nam (EVN), which is Vietnam's national power utility. As the first foreign-owned independent power producer (IPP) in Vietnam, and upon the successful completion of this power plant in FY15, we believe JAKS will be in the running for other IPP projects there. From this first IPP, we estimate an incremental net profit of around RM52.7 million in FY16, or five times of our projected FY10/2010 net profit of RM11.1 million.
We believe the market has yet to fully reflect JAKS' power plant venture in Vietnam, which alone is worth RM676.8 million or RM1.54/share based on discounted cash flow (DCF). We thus estimate a sum-of-parts (SOP) fair value for JAKS of RM2, which implies a huge upside of 141% from current levels.
Our SOP valuation includes JAKS' construction, manufacturing and trading businesses at 10 times FY10/10 price-earnings ratio (PER), rental income from UTAR at DCF, land development in Section 13, Petaling Jaya at revised net asset value (RNAV) and power plant venture in Vietnam at DCF.- RHB Research Institute, April 14
This article appeared in The Edge Financial Daily, April 15, 2010.
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