In Q3FY15, Mudajaya swung to profit from consecutive losses after netting RM14.3m from net losses of RM12.3m and RM19.7m in Q2 and Q1 respectively. The quarterly profit was also lifted by foreign exchange gains of RM3.4m. While positive, we believe it is not out of the woods yet as evident by the collapse of revenue, which was down -48% YoY due to slow jobs replenishment rate. We are also concerned on the lack of information on its progress of its 4x360MW power plant in India with the earlier expectation that it is supposed to be fired up by mid-2015.

• Outstanding orderbook. The Group’s orderbook is estimated to be in excess of RM1.2bn, with the recent job wins in Pengerang. YTD, the construction business is in the red with c. RM6.8m operating loss. The jobs driving its construction division are MRT and the other main job includes the offshore equipment procurement works for its 40%-owned 62MW Wind Energy Farm in Cebu, Philippines. Tender book is believed to be around c.RM8bn, primarily from the power industry (e.g. Tracks 3B & 4A, Pengerang, etc) worth c.RM1.5bn. Other jobs eyed include highways such as DASH and SUKE.
• Indian Power Plant. With the recent deadline misses, the management has not come up with a new guidance on the commissioning of unit 1 of its power plant. As indicated earlier, we already discounted the earnings contribution from the power plant this year. It is disappointing to see that the Group failed to obtain the necessary approvals to fire up despite completing the unit since the beginning of the year. Recap that earlier guidance was at least two units will be fired up by end-2015 and the remaining by early 2016. The timing is now fluid and we will need more clarity before we make further adjustments to our earnings.
• Maintain Neutral and RM1.00 (pegged at 50% to its NTA). With no catalysts in sight and continued disappoints in completing its power plant, we believe that the Group is not out of the woods yet and will struggle to be profitable this year due to the lack of new jobs and depleting orderbook. That said, the net loss is expected to be lower than expected, and we adjusted FY15 by +63% to reflect the earnings turnaround.

Source: PublicInvest Research - 26 Nov 2015