Mudajaya (BUY) - Over reaction on coal issue?

Stock Name: MUDAJYA
Company Name: MUDAJAYA GROUP BHD

Research House: HLG

Price Call: BUY

Target Price: 4.27

Mudajaya (BUY)

Over reaction on coal issue?

• News report that Coal India (CIL) has agreed to sign a revised FuelSupply Agreement (FSA) with power producers. This is positive for Mudajaya's(MDJ) Letter of Assurance (LoA) for coal supply which will now be convertedinto FSA, indicating assured supply.
• We believe that the India Government will prioritise distribution ofcoal supply for power producers as electricity is a basic necessity afterwater, food and shelter and also for the country's development.
• We feel that the kneejerk reaction on MDJ's share price has overshot onthe downside. Our base case valuation for the company works out to RM2.87.
• With the company's local operations still fundamentally sound, wemaintain our BUY call on MDJ but with a lower revised TP of RM4.27.

Source: Hong Leong Investment Bank Research - 19 April 2012