Stock Name: MUDAJYA
Company Name: MUDAJAYA GROUP BHD
Research House: OSK



OSK Research is removing Mudajaya Group Bhd from top sector pick until the issue of its insufficient disclosures on the Chhattisgarh's independent power plant (IPP) project is fully settled.

However, it was maintaining a "buy" review on Mudajaya, with a reduced target price of RM6 from RM7.22 previously.

The Securities Commission yesterday issued a caution and reminder to the group and its board of directors to strictly observe their disclosure obligations in relation to an overseas investment by the group.

It said a separate exercise would be conducted to review the use and disclosures associated with the "round tripping" practice.

"We read the SC's statement as a sign that Mudajaya is not totally out of the woods yet," it said in a research note today.

The research house, however, believed Mudajaya would not be charged for round tripping as the structure of its Chhattisgarh IPP did not accurately fit the definition.

Furthermore, the development cost of US$1.06 million for per megawatt (MW) was below the current market rate of between US$1.5 million and US$2 million per MW, it said.

In an announcement yesterday, Mudajaya said they had signed a memorandum of understanding with the Laos Government to develop a 60MW hydro plant in that country.

"Should the feasibility study prove positive, the project will be implemented via Build, Operate and Transfer concept, under a 30-year concession period," said OSK.

Mudajaya will have 75 per cent stake with the balance held by the Laos Government.

"We estimate a development cost of US$90 million to US$120 million and expect minimal earnings impact given its small power capacity," it added. -- Bernama