Mudajaya - 4QFY14 RESULTS - Raising the red flag for FY14

Stock Name: MUDAJYA
Company Name: MUDAJAYA GROUP BHD

Research House: CIMB

Price Call: SELL

Target Price: 1.26

Mudajaya - Turning the corner

Stock Name: MUDAJYA
Company Name: MUDAJAYA GROUP BHD

Research House: CIMB

Price Call: BUY

Target Price: 2.75

Mudajaya - UPDATE REPORT - Secures coal supply for Indian IPP

Stock Name: MUDAJYA
Company Name: MUDAJAYA GROUP BHD

Research House: CIMB

Price Call: BUY

Target Price: 3.24

Alliance maintains 'neutral' on Mudajaya

Stock Name: MUDAJYA
Company Name: MUDAJAYA GROUP BHD

Research House: ALLIANCE

Price Call: HOLD

Target Price: 2.93

Alliance Research has maintained its 'neutral' call on the Mudajaya Group, given the projected earnings decline this year and no immediate contract win potential for key domestic project rollouts.

"Mudajaya's orderbook stands at RM2.6 billion (1.8x Financial Year 2012 construction revenue). We feel that new job wins are likely to fall short of its orderbook burn rate," it said in a research note today.

"Our estimates impute RM500 million in annual orderbook replenishment from Financial year 2013-2015.

"With this, revenue should be on a declining trend, unless sizable job wins materialise," it added.

It also forecast Financial Year 2013 earnings for the
construction-cum-energy player to decline by 17 per cent year-on-year, given the drop in topline growth.

"Our earning growth of 16 per cent and six per cent for Financial Year 2014-2015 hinges heavily on associate contributions from Indian partner RKM Powergen, once the Chhattisgarh independent power producer (IPP) plant
commences.

"Overall, our Financial Year 2013-2014 earnings are cut by 24.3 per cent and 16 per cent, respectively.

"The lower sum of parts (SOP) discount offsets the impact of our earnings cut and our target price is raised marginally from RM2.85 to RM2.93 (3.7 per cent upside)," Alliance Research said.-- Bernama

4Q blip does not change our conviction

Stock Name: MUDAJYA
Company Name: MUDAJAYA GROUP BHD

Research House: CIMB

Price Call: BUY

Target Price: 2.93

Tail end of overhang?

Stock Name: MUDAJYA
Company Name: MUDAJAYA GROUP BHD

Research House: CIMB

Price Call: BUY

Target Price: 3.75

Mudajaya Group - 2Q12 Look beyond the margin glitch

Stock Name: MUDAJYA
Company Name: MUDAJAYA GROUP BHD

Research House: CIMB

Price Call: BUY

Target Price: 3.70

India's wakeup call

Stock Name: MUDAJYA
Company Name: MUDAJAYA GROUP BHD

Research House: ALLIANCE

Price Call: BUY

Target Price: 4.37

Mudajaya - Update - Cheapest exposure to highway and power plant jobs

Stock Name: MUDAJYA
Company Name: MUDAJAYA GROUP BHD

Research House: CIMB

Price Call: BUY

Target Price: 3.45

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

MUDAJYA (FV RM2.66 - NEUTRAL) Corporate News Flash: Uncertainties Over Coal Supply

Stock Name: MUDAJYA
Company Name: MUDAJAYA GROUP BHD

Research House: OSK

Price Call: HOLD

Target Price: 2.66

THE BUZZ

The Wall Street Journal reported that Coal India Ltd's (CIL)board of directors has finally given the green light for the company to signFuel Supply Agreements (FSAs) with power producers in India. This comes after apresidential directive issued by India's government to the state-owned companyto sign the accords after CIL missed the initial deadline of 31 March. Weunderstand that the FSAs will be signed within the next 3 days before 20 April.

OUR TAKE

What happened back then? 90% owned by the state government,CIL is the largest coal producer in the world in terms of capacity. Itcontributes  to  some 90% of coal production in India. InFY03/11, CIL produced 436m  tonnes ofcoal, missing the government's previous target of 447m  tonnes as heavy rainfall hit operations. Consequently,several power stations had to stop or cut production late last year due to fuelshortages, leading to blackouts in some parts of the country. To ensuresufficient coal supply going forward, India's Prime Minister Officeadministration has set an initial deadline of 31 March for CIL to enter intoFSAs with power producers. Nonetheless, the deadline was not met, promptingPrime Minister Manmohan Singh's administration to issue a presidentialdirective on  5 April to ensure that  CIL sign the accords within the next 15 days.

Deceivingly positive.At first glance, the announcement seems positive with the FSAs between CIL andpower producers finally being sorted out to ensure sufficient coal supply tomeet fuel requirements. The long-awaited agreement  is expected to  benefit power plants with anestimated  capacity of  50kMW with the nation now sitting on total 193kMWof installed capacity. Nonetheless, after counterchecking with other media sources from India, we found outthat CIL has  set itself  a lower penalty  (to be paid to power producers) if it failsto meet the minimum supply obligations, which we deem a negative surprise.

Lower penalty putsconviction in doubt. Under the FSAs as approved by CIL's board, should thecompany fail to supply at least 80% of the contracted coal to the new power stations,it would only have to pay 0.01% of the value of the shortfall as the penalty asopposed to the 10% stipulated previously. And again to the disadvantage of  the power producers in India, the penaltyclause will only  be triggered afterthree years from the date of signing the FSAs. In our view, the FSAs havenearly wiped off all the liabilities that CIL will have to bear  arising from a  potential  default in case of  a coal supply shortfall. This puts its commitment towards ensuring sufficientfuel requirements in doubt and leads us to believe that there is increasingrisk of shortages in fuel supply, which could jeopardize the entire powerindustry in India.

Nothing is certain inIndia. Although Mudajaya's management confirmed that its 26%-owned associateRKM Powergen has secured a backup coal supply in India amounting to 99m  tonnes which will meet  the fuel requirements for  its 4x360MW power plant in Chhattisgarhfor  over 15 years, we are increasinglyconcerned  over the flip-flopping of policiesby India's existing administration. A few recent examples include the ban oncotton exports, introduction of a provision that allows India to tax foreigntakeover of Indian assets retroactively to 1962, cancellation of telecom licences issued  previously to some foreign telco operators, revocation of its approval to allowforeign supermarkets to enter India as well as suspension of South Koreansteelmaker Posco's plans to build a USD12bn steel mill in India. This latestpiece of announcement aggravates our concerns further as we deem the loweredpenalty a lower commitment from CIL to honour the FSAs and we also do notdiscount the possibility of the Indian government taking back its words on the allocatedbackup coal supply. There is mounting pressure from opposition parties which questionthe huge 50%-60% discount attached to the contracted coal supply pricing, whichreportedly translates into a loss of national income of over INR10tn.

Imported coal not aviable option for now. Should the local coal supply fall short, RKM Powergenwould likely have to source its fuel requirements in the international coalmarket as the last resort. Currently, imported coal is trading atUSD90-110/tonne vis-''-vis RKM  Powergen's  coal linkages with the Indian Government atan effective price of USD40-50/tonne. Nonetheless,  we understand that the  existing fuel cost  pass-through formula doesnot explicitly incorporate a potential hike in operating expenses should  RKM Powergen source its coal requirements fromoutside of India. Given the political ruckus that is created every time a stateelectricity board contemplates a tariff hike, we think a revision in itsexisting fuel cost pass-through formula is rather unlikely at this juncture andhence, imported coal does not look like a viable option in the near term.

Risks of Chattisgarhbeing left idle  increase. RKMPowergen's power plant in Chhattisgarh is scheduled to commence operations by4Q12 with the first unit likely to do so by the end of this year, while the 3remaining will go on stream on a staggered basis, i.e. every 3 monthsthereafter. With this latest development, we see increasing risks of its plantbeing left idle upon completion, as witnessed in the current scenario for someof the Independent Power Producers in India, as CIL have removed most of itsliabilities in the event of coal production shortfall. On the other hand, thepossibility of utilizing  imported coal,which is a lot pricier, seems unlikely for now until the state electricityboard gives its nod on the revision of electricity tariffs.  

Downgrade to NEUTRAL.  We are downgrading our call on Mudajaya fromBuy to NEUTRAL in view of the potential risks arising from  a potential shortfall in coal supply to meet its fuel requirements.  By the same token, our FV is now revised downto RM2.66, after  attaching a steeperdiscount of 50%  (from 30% previously).While some may argue that our FV now implies a rather appealing 6x FY12PER  being pegged  to Mudajaya's construction earnings  sans any contribution from its Chhattisgarh power venture,  our cautious stance is warranted by potentialwrite-offs in its books (in the form of writing down its investment in RKMPowergen which stood at RM431m as well as its outstanding receivables ofRM683m) should the Chhattisgarh venture turn sour. Do note that as of Dec 2011,its remaining works on Chhattisgarh amounted to RM1.8bn, making up close to 50%of its outstanding orderbook.

Source: OSK188

Mudajaya -BUY; FV: RM3.72

Stock Name: MUDAJYA
Company Name: MUDAJAYA GROUP BHD

Research House: OSK

Price Call: BUY

Target Price: 3.72

During our recent conversation with Mudajaya following therelease of its 4QFY11 results, management said works at Chhattisgarh arelargely on track for all 4 units to be completed by 3Q 2013. On the domesticfront, jobs  may continue to  flow with upcoming potential contracts suchas civil works for the 1,400MW Prai power plant, Kinrara-DamansaraExpressway  (RM1.5bn-RM2bn), LRT depot inPutra Heights  (RM400m), as well asaerobridges at KLIA2 and the Petronas Solar Farm in Kuantan worth RM100meach.  We continue to likeMudajaya's  relatively attractivevaluation, strong contract wins  YTD, andpotential  to nail  more contracts. Maintain BUY, at a revised FVof RM3.72, based on SOP valuation.

Sturdy RM4.0bnorderbook. Mudajaya's orderbook totals a stellar RM4.0bn, of which RM1.0bnworth of jobs was secured this year after the company clinched the civil works portionof the proposed Tg Bin power plant extension. The jobs on hand include  the RM2.0bn remaining works at its 26%-ownedChhattisgarh power plant in India, RM600m in outstanding civil works at theManjung power plant's extension and some small contracts totaling RM60m.Following a meeting with management, we took a look at the progress of itsIndia venture as well as potential jobs flow in the near term.     

Progress in India.Mudajaya embarked on its maiden venture in India's power sector in July2005  by taking  up  a26% stake in RKM Powergen, the special purpose vehicle (SPV)  undertaking a 4X360MW coal-fired IPP  projectworth RM5bn in Chhattisgarh, India. The SPV inked a Power Purchase Agreement(PPA) with the Chhattisgarh State Electricity Board and Power Trading Corp ofIndia to supply power at a pre-fixed tariff, subject to fuel and interest costspass-through. Subsequently, Mudajaya's 80%-owned subsidiary, MIPPInternational, was awarded the engineering and procurement contract for all the4 units. Progress has been fairly encouraging so far, with the first unitlikely to commence operation by the end of this year, while the rest will go onstream on  a staggered basis every 3months thereafter. Despite some delays earlier due to issues relating to theresettlement of villages and floods, works have been restored and the company'sprogress remains largely on track. 

IPP contribution tokick in from 2013. Assuming no further delays, we expect earnings from itspower venture to commence progressively by early 2013, with full year impactlikely to kick in by 2014. Assuming an EBITDA margin of 50%, RKM Powergen wouldgenerate core earnings of some RM600m-RM900m p.a. The underlying differenceslie in the effective tax rate (first 10 years of operation is tax-exempt), targetedaccelerated depreciation in the early years, as well as the market tariff rate uponexpiry of the PPA, which we assume to be INR4.5/kWH vis-''-vis the contracted INR2.3-3/kWHrate

Source: OSK188

Stock Overview - MUDAJYA - 7 Mar 2012

Stock Name: MUDAJYA
Company Name: MUDAJAYA GROUP BHD

Research House: JUPITER

Price Call: BUY

Target Price: 3.22

MUDAJYA ( 5085 : 2.94 ) : Targeting 3.22

Description

Resistance : 3.22
Support : 2.79

RSI of 63
RSI is on the rise

STOCHASTIC
It riding on an upswing

TREND INDICATOR

Comment
The current resumption off the low of 2.79, is heading for 3.22. Downside is limited to a pullback support of  2.86

Trading Strategy
Buy. Stop loss is at 2.79

Source: Jupiter Securities Research 7 March 2012

Mudajaya (BUY) - Powering the future

Stock Name: MUDAJYA
Company Name: MUDAJAYA GROUP BHD

Research House: HLG

Price Call: BUY

Target Price: 4.61

Mudajaya (BUY)

Powering the future

• We returned on a positive note following Mudajaya's investorspresentation last Friday whereby Mr. Anto, Group MD & CEO, and other seniormanagement personnel were present.
• Progress for the India IPP has been substantial, with ~US$570m worth ofEP works outstanding equivalent to 40% completion is on track for commercialoperations by year end.
• Suruhanjaya Tenaga is targeting for additional 4,500MW gas-fired and1,000MW coal-fired capacity to be awarded by 2016. This will translate to~RM3bn power-related civil works up for grabs, an area where Mudajaya has anedge over its competitors. Besides power projects, Mudajaya has also bid for~RM2.8bn worth of jobs ranging from MRT/LRT packages to KLIA2 Aerobridge.
•  Maintain BUY with TP of RM4.61 based on SOPvaluation.

 Source: HLIB Research 5 March 2012

Mudajaya - Update - Greater optimism during 4Q briefing

Stock Name: MUDAJYA
Company Name: MUDAJAYA GROUP BHD

Research House: CIMB

Price Call: BUY

Target Price: 3.45

Mudajaya (BUY) - Power ending for FY11

Stock Name: MUDAJYA
Company Name: MUDAJAYA GROUP BHD

Research House: HLG

Price Call: BUY

Target Price: 4.61

FY11 PATAMI grew by7% to RM231m (48.4 sen/share), missing ours and streets' estimates slightly by 2.6% and 3.3% respectively.

Mudajaya's FY11 earnings were largely derived from the Indian IPP project as indicated by the accelerating MI charges over the past quarters. We gather that the Indian project is 35% complete.

Additionally, Mudajaya has officially clinched the civil and structural works portion for the1,000MW Tanjung Bin power plant extension project worth RM1bn. Hence, Mudajaya has an outstanding order book of ~RM3.7bn.

FY12-13earnings reduced by 8% and 1% respectively to better reflect the timing of profit recognition. Maintain BUY call with a TP of RM4.61.

Source: HLB Research 24 Feb 2012

Mudajaya - 4QFY11 - Powering up the project flows

Stock Name: MUDAJYA
Company Name: MUDAJAYA GROUP BHD

Research House: CIMB

Price Call: BUY

Target Price: 3.45

MUDJYA (FV RM3.88 - BUY) FY11 Results Review: Aided by Tax Rate Boost

Stock Name: MUDAJYA
Company Name: MUDAJAYA GROUP BHD

Research House: OSK

Price Call: BUY

Target Price: 3.88

Mudajaya's FY11  netprofit  of RM231.0m came in withinour  and consensus estimates, aided by afavourable tax rate of 5.8%. At the pretax level, earnings lagged bothestimates by 21.1% and 12.3% respectively, owing to  lower construction margins recognized  and start-up expenses for its associate. Afinal DPS of 2.5 sen was proposed, bringing its FY11 DPS to 8.0 sen. On aseparate note, Mudajaya bagged the RM1bn civil works contract of the TanjungBin plant extension. Maintain BUY with our FV marginally lowered to RM3.88.

Subpar margins.Mudajaya's FY11  revenue of RM1347.1msurged 54.8% y-o-y driven by the 63.2% jump in contribution from its constructiondivision, which saw the delivery of equipment components for  its Chhattisgarh  power plant. However, PBT  improved by a more moderate 5.6% to RM293.9mas margins retreated on escalating material costs and the sharing of start-upexpenses in its associate RKM Powergen. All in all, FY11 core earnings were up7.2% y-o-y to RM231.0m despite higher leakages on minority interest (which morethan doubled to RM45.9m due to ongoing works in Chhattisgarh) as the groupregistered a below average effective tax rate of 5.8% for the year. It proposeda final DPS of 2.5 sen, bringing its FY11 DPS to 8.0 sen which implies a 20%payout ratio.

Decent quarterlynumbers. 4QFY11 numbers generally marked some decent improvements in termsof both sequential and y-o-y, as we understand that  its work in Chhattisgarh is now back on track and in full swing. Managementguided that it has recognized close to 40% of the project with the first 2units of the power plant ready to be commissioned by end-2012, with the remainingexpected to be ready by mid-2013.  

Tg Bin in its bag.  On a separate announcement, Mudajayaconfirmed that it  was awarded the RM1bncontract for the construction of civil works for the 1,000MW Tanjung Bin plantextension, with the job likely to be completed by mid-2015. We deem the announcementwithin our expectations (as highlighted in our previous report entitled 'Likely To Snag Tanjung Bin Job'). Mudajaya'sorderbook has now swelled to RM4.6bn (excluding RM1bn legacy jobs), which inour view could keep it busy well into 2014.

BUY. We aretweaking our construction margins lower as a precautionary stance in view offurther potential weaknesses, but we are incorporating the RM1bn Tg Binextension into our orderbook assumptions. Consequently, our  FY12 EPS forecast  is lowered by 6.0%but our FY13 core earnings are bumped up by 5.6%. Although the group has alreadyhit our FY12 orderbook replenishment target of RM1bn, we do not discount the possibilityof it securing more contracts this year as the Government accelerates the implementationof mega-billion construction projects, including the 2,400MW Prai power plant.Maintain BUY with its FV marginally lowered to RM3.88 based on our SOP valuation.

Source: OSK188

Likely to Snag Tanjung Bin Job

Stock Name: MUDAJYA
Company Name: MUDAJAYA GROUP BHD

Research House: OSK

Price Call: BUY

Target Price: 4.08

HLIB Research 8 February 2012 (Construction; GenM; Traders Brief)

Stock Name: GAMUDA
Company Name: GAMUDA BHD

Research House: HLG

Price Call: BUY

Target Price: 4.41

Stock Name: MRCB
Company Name: MALAYSIAN RESOURCES CORP

Research House: HLG

Price Call: BUY

Target Price: 2.64

Stock Name: SUNWAY
Company Name: SUNWAY BERHAD

Research House: HLG

Price Call: BUY

Target Price: 3.12

Stock Name: MUDAJYA
Company Name: MUDAJAYA GROUP BHD

Research House: HLG

Price Call: BUY

Target Price: 4.61

Stock Name: GENM
Company Name: GENTING MALAYSIA BERHAD

Research House: HLG

Price Call: HOLD

Target Price: 4.07

Construction (OVERWEIGHT)

Relook into Gamuda and MRCB's valuation

'''' YTD, KLCON Index is up +9.8% vis-''-vis the KLCI's +0.5%. We believe that the strong outperformance is due to improved newsflow for the sector and return of risk appetite from investors.

'''' Gamuda and MRCB have seen their existing TP of RM3.81 and RM2.22 breached respectively. Hence, this report relooks into both companies' valuation as to where it may potentially touch if things materialise as planned.

'''' We upgrade Gamuda's TP by 16% to RM4.41 from RM3.81 and MRCB's TP by 19% to RM2.64 from RM2.22 to take advantage of the current buoyant sentiment in the construction sector, which tends to result in share prices overshooting. However, we caution that our newly assigned TP will be revised downwards if things do not pan out as planned.

'''' We MAINTAIN our OVERWEIGHT stance on the sector as we believe that more ETP projects should materialise this year to mitigate slowing economic growth.

'''' Top Picks in order of preference:

Sunway (TP: RM3.12)

Gamuda (TP: RM4.41)

Mudajaya (TP: RM4.61)

MRCB (TP: RM2.64)

''

Genting Malaysia (HOLD)

Destination Resort Bill Stalled

'' According to Reuters, the legislation that would allow three new resort-style casinos in Florida has been withdrawn before a House subcommittee could hold their vote. The bill has failed to pass at least one committee; hence the measure is dead for 2012.

'' This has turned out to be a disappointment for GenM. However, GenM's RWM remains positive with its mission to build a destination resort in Florida and will continue to work with the legislature and community to bring this mission into reality.

'' If the legislation is not approved, GenM will still continue with the US$3.8bn development, spreading it across 10-15 years. With this, GenM will incure approximately US$253-380m additional capex p.a., which should not be an issue given its net cash of RM2.2-4.8bn and free cash flow of RM0.8-1.8bn in FY11-13.

'' No changes made to our forecast. Maintain HOLD with TP of RM4.07.

''

KLCI: To retest 1550 zones after the 1530 breakout

'''' As KLCI continued to stay decisively above the major SMAs support levels, it is poised to unfold a follow-through rebound. Following last week's rally that partially filled the large gap of 1,529-1,546 pts, the index may continue its ascending trend today to retest immediate resistance target at 1550.

'''' Immediate supports are Immediate supports are 1530 (31 Dec 11), 10-d SMA (1523) and 1520 (mid Bollinger band).

''

RCECAP: More technical rebound ahead

'''' Technically, RCECAP short to medium term outlooks are positive as daily, weekly and monthly charts (FIG#3, 4 & 5) are strengthening. The strong breakout of the neckline resistance near RM0.52 will spur greater upside towards RM0.55-0.58 targets. Post RM0.58, more formidable resistance is RM0.62 (76.4% FR). Immediate supports are situ RM0.48 (30-d SMA), RM0.47 (100-d SMA) and RM0.46 (daily lower Bollinger band).

'''' Cut loss below RM0.46.''