Mudajaya ended 1QFY14 with a net profit of 25.1m (-40.5% YoY, +9.4% QoQ), which was within our expectations but slightly below consensus, with 3MFY14 net profit accounting for 23% and 21% of our and consensus full year estimates respectively. The fall in earnings is mainly due to higher margin projects (especially equipment delivery of the Equipment Procurement for its 4 x 360MW coal-fired power plant at Chhattisgarh, India) completed. We still like Mudajaya as we believe it remains the key beneficiary of the power and infrastructure spending in the country. No dividend was proposed for the quarter.

Maiden contribution from power project. This quarter recorded the Group‟s maiden contribution from its 5MW solar power plant in Gebeng, Pahang, which contributed revenue and PBT of RM1.4m and RM0.6m respectively. on the flip side, the Group also incurred RM3.0m in interest expense for the quarter, as borrowings jumped from RM27.5m at end-FY13 to RM414m, bringing the Group to net gearing of 0.08x from its net cash position previously.

Awaiting new jobs. We understand that the management is one of the few invited bidders for the new power plants (Track 3A & 3B) and should expect some job packages to be announced in the next few months. Total contract value for these two jobs can go as high as RM3bn. In the near term, earnings are driven by projects such as MRT Package V3, Tanjung Bin Power Plant Extension and Manjung Power Plant Extension. Meanwhile, new jobs targeted by Mudajaya include the Manjung Power Plant (1000MW or Track 3A), Track 3B (2000MW), and RAPID Power Plant in Pengerang, Johor (1,300MW) with combined value of c.RM4-5bn. We believe the management is able to secure at least RM1bn in new jobs in FY14.

Maintain Outperform and TP of RM3.10, pegged to c.11x PER of FY15 EPS. We still like Mudajaya for its expertise in power plant construction i.e. beneficiary of power plant construction spending and attractive valuations.

Source: PublicInvest Research - 28 May 2014