Price: MYR4.72
12-Month Target Price: MYR5.60
• Mudajaya announced that the group, in a JV with Bina Rezeki Sdn Bhd, has received a letter of intent (LOI) for an MYR241.3-mln contract to design and construct the Boulevard Plaza Development at Putrajaya. The project is expected to be completed by Dec. 31, 2011. Mudajaya has a 51% interest in the JV while its partner, Bina Rezeki, holds the rest.
• With the new contract, Mudajaya’s outstanding order book stands at MYR5.5 bln, where the Indian IPP project accounts for about 60%. We can expect positive newsflow for local and overseas projects ahead: we understand the group is actively negotiating for two or more local jobs and is bidding for USD500 mln worth of infrastructure and building works in Vietnam and some MYR500 mln in Saudi Arabia.
• On its IPP India project, the plant is scheduled to commence operations in 2012, with construction profits kicking in significantly over the next two years. Mudajaya’s associated company, RKM, has raised a total of MYR1.8 bln in external financing so far (for Phase 1 and partially for Phase 2) and is at an advanced stage of securing the remaining loan of MYR1.9 bln for Phase 2 to achieve financial closure.
• While we keep our 2009 earnings forecast largely unchanged, we increase our 2010 forecast by 4% to incorporate the above newly secured construction project in Putrajaya. We have also assumed MYR400 mln worth of jobs wins in 2010.
• We maintain our Buy recommendation with a higher 12-month target price of MYR5.60 (from MYR4.90). Although the share price has risen by about 40% over the past three months, the stock deserves consideration, given that its valuations are still attractive, in our view. The group, which is presently trading at projected PER of 9.4x for 2010, has yet to reflect its near-term growth potential (2-year forward
EPS CAGR of more than 50%).
• We have increased our target PER multiple to 11x (vs. 10x previously) to reflect the group’s strong order book replenishment prospects and the positive outlook for the construction industry on the back of further
rollout of government sponsored projects. Our target price also includes a projected net DPS of 3 sen.
• We believe Mudajaya’s fundamentals remain intact, with strong earnings visibility supported by a record-high order book, recurring income prospect of its IPP India project and healthy balance sheet (net cash of MYR149.9 mln at end-September 2009, zero gearing).
• Risks to our recommendation and target price include delays in the execution of new contracts, in particular the Indian IPP project and in the construction progress of existing contracts. Other risks include higher-than-expected volatility in construction material prices and fuel costs.
52-week Share Price Range (MYR) 1.00 - 4.72
Major Shareholders:
Dataran Sentral (M) Sdn. Bhd. 26%
Tiararibu (M) Sdn Bhd 23%
United Flagship 9%
By Standard & Poors
Analyst: Seu Yee Lau
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