Results

1QFY13 PATAMI dropped by 43% to RM42.1m (7.75 sen/share), making up 25% of earnings estimates, but missing consensus estimates by making up only 19%.

Deviations

Largely in line.

Dividends

Net dividend of 3 sen/share declared, lower than last year’s corresponding payout of 4 sen/share. Ex-date on 17 Jul-13, payment on 16 Aug-13

Highlights

YoY… Revenue declined by 14% as the India IPP EP contract comes to the tail end. However, this is not a true reflection on the plant’s progress which is actually filled with activities towards completing the plant (please refer to our report “Powering towards the inflection point” dated 3 May- 13). However, as the EP contract reaches the tail end coupled with local projects which have lower margins, operating profit margin compressed to 14% from 21%. Hence, earnings fell by 43% to RM42.1m.

QoQ… Revenue rebounded by 24% buoyed by higher construction activities. However, due to higher MI charge (indication for the progress of the India power plant) and forex gain in the previous quarter, earnings fell by 11%. If adjusted for forex fluctuations, earnings would have grown by 20%.

Earnings visibility… Outstanding order book of ~RM2.1bn (see Figure #1), translating to ~1.3x FY12’s construction revenue and ~1.3x order book-to-market cap ratio.

Risks

Delay in completing the India IPP project; Regulatory and political risk (both local and abroad); Rising raw material prices; Unexpected downturn in the construction sector; and Sharp depreciation in the Indian Rupee and US dollar.

Forecasts

Unchanged.

Rating

BUY

We reaffirm our view that Mudajaya will be able to successfully complete its India power plant project. Meanwhile, the company has strong prospects to clinch civil works for the gas-fired Prai power plant and the upcoming 3,000MW coal-fired power plant worth ~RM2.8bn collectively. The company is also close to securing some PPP projects. Hence, we maintain our BUY call.

Valuation

• TP of RM3.53 based on SOP valuation maintained

Source: Hong Leong Investment Bank Research - 22 May 2013