Bullish outlook on Mudajaya's plant job
BY INTAN FARHANA ZAINUL
PETALING JAYA: While Mudajaya Group Bhd is likely to win the RM300mil rail contract to help build a railway link in Subang, analysts are more bullish on the group’s potential new power-plant awards in the coming months.
“Despite the potential rail contract win, we are much more optimistic about Mudajaya’s prospects in securing power-related civil works in Janamanjung,” said Hong Leong Investment Bank Research.
It sees the potential rail contract win as part of Mudajaya’s strategy to bid for sizeable infrastructure projects for better margins through economies of scale.
“Power plant construction remains Mudajaya’s key expertise,” CIMB Research analyst Sharizan Rosely said, adding that the group had the experience of building 16 power plants in the past.
He said the group’s outstanding order book was RM2.2bil and that it was looking to clinch RM500mil to RM1bil worth of jobs in the second half of this year out of RM5bil tender book, of which 60% are for power plant civil works.
Sharizan was upbeat on Mudajaya’s local power-plant prospect due to the limited supply of local contractors with good track records, noting that Mudajaya stood a strong chance of securing at least one civil work job in the fourth quarter this year.
“This is for another 1,000MW extension of the Manjung coal-fired power plant in Perak,” he said.
He added that Mudajaya was in an “advantageous position” as it was undertaking the first 1,000MW extension of the same power plant in Perak.
Meanwhile, the other job it is tendering for are a civil work job for the 1,701MW plant in Seberang Prai and the 1,300MW co-generation power plant in Pengerang, Johor.
Sharizan has maintained “outperform” with a target price of RM3.25 on the group with catalysts to come from power plant award, the fuel supply agreement (FSA) for its Indian independent power plant (IPP) project and regional power deals.
Hong Leong Investment Bank noted in the same report that Mudajaya’s Indian IPP project remains a key point to unlock the value of the group.
“Both its share price and valuation remains a laggard in the construction sector, hence we are maintaining our ‘buy’ call on the company,” it said.
However, according to Sharizan, the terms and agreements in the FSA for its Indian IPP project are intact and Mudajaya management does not expect anymore hold-up in the progress of its 26%-owned coal-fired power plant in Chhattisgarh.
He said assuming that the FSA would be resolved by the end of the year, the testing and commissioning for the first unit at Chhattisgarh would begin on time.
“A signing of the FSA should lift the overhang in its share price as investors remain wary of further delays in the roll-out of the group’s maiden Indian IPP venture,” he said.
Yesterday, Mudajaya closed five sen higher to RM2.75 with 459,400 shares done.
Publish date: 06/08/13