Stock Name: MUDAJYA
Company Name: MUDAJAYA GROUP BHD
Research House: OSK
Mudajaya Group Bhd
(April 5, RM5.00)
Maintain buy at RM4.90 with target price RM7.44: Tenaga Nasional Bhd recently signed an engineering, procurement, construction and commissioning (EPCC) agreement with the Consortium of Alstom Power System SA for the expansion of the 1000MW Janamanjung coal-fired power plant. The portions of the contract are valued at US$810 million (RM2.5 billion), '180 million'' (RM771 million) and RM1.8 billion. The plant is expected to be fully commissioned by March 2015.
This recent award to the Alstom consortium is positive for Mudajaya. In our previous reports, we had highlighted that Mudajaya is likely to participate in the civil works for Janamanjung should the Alstom consortium win the EPCC job. We expect the consortium to subcontract the civil works to Mudajaya. Generally, the civil works for a coal-fired power plant make up 15% to 20% of the overall EPCC value.
Hence, based on the RM5 billion EPCC value for Janamanjung, the civil works portion would work out to RM750 million to RM1 billion. This should represent a healthy replenishment for Mudajaya's order book as one of its major projects, the KL-Kuala Selangor Expressway (RM958 million), is nearing completion. Management guides that the subcontract award could be out as soon as within a month.
Earlier this year, the Energy Commission had issued a request for proposal to Tanjung'' Bin and Jimah for another 1000MW expansion. Both parties have until mid-April to submit their proposals.
We understand that Mudajaya has been in talks with an EPCC contractor to participate in the civil works for this 1000MW expansion.
The actual award of the Janamanjung civil works to Mudajaya is expected to provide the upside to our earnings estimates, mainly from FY12 onwards, as we have only imputed a conservative RM200 million in annual order book replenishment.
For now, we are leaving our forecasts and RM7.44 fair value unchanged, which is based on a 20% discount to our sum-of-parts value based on 12 times FY11 earnings and a free cash flow to equity valuation of its Chhattisgarh IPP at 16% equity cost. ' OSK Research, April 5
This article appeared in The Edge Financial Daily, April 6, 2011.
Company Name: MUDAJAYA GROUP BHD
Research House: OSK
Mudajaya Group Bhd
(April 5, RM5.00)
Maintain buy at RM4.90 with target price RM7.44: Tenaga Nasional Bhd recently signed an engineering, procurement, construction and commissioning (EPCC) agreement with the Consortium of Alstom Power System SA for the expansion of the 1000MW Janamanjung coal-fired power plant. The portions of the contract are valued at US$810 million (RM2.5 billion), '180 million'' (RM771 million) and RM1.8 billion. The plant is expected to be fully commissioned by March 2015.
This recent award to the Alstom consortium is positive for Mudajaya. In our previous reports, we had highlighted that Mudajaya is likely to participate in the civil works for Janamanjung should the Alstom consortium win the EPCC job. We expect the consortium to subcontract the civil works to Mudajaya. Generally, the civil works for a coal-fired power plant make up 15% to 20% of the overall EPCC value.
Hence, based on the RM5 billion EPCC value for Janamanjung, the civil works portion would work out to RM750 million to RM1 billion. This should represent a healthy replenishment for Mudajaya's order book as one of its major projects, the KL-Kuala Selangor Expressway (RM958 million), is nearing completion. Management guides that the subcontract award could be out as soon as within a month.
Earlier this year, the Energy Commission had issued a request for proposal to Tanjung'' Bin and Jimah for another 1000MW expansion. Both parties have until mid-April to submit their proposals.
We understand that Mudajaya has been in talks with an EPCC contractor to participate in the civil works for this 1000MW expansion.
The actual award of the Janamanjung civil works to Mudajaya is expected to provide the upside to our earnings estimates, mainly from FY12 onwards, as we have only imputed a conservative RM200 million in annual order book replenishment.
For now, we are leaving our forecasts and RM7.44 fair value unchanged, which is based on a 20% discount to our sum-of-parts value based on 12 times FY11 earnings and a free cash flow to equity valuation of its Chhattisgarh IPP at 16% equity cost. ' OSK Research, April 5
This article appeared in The Edge Financial Daily, April 6, 2011.
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