Results

1HFY13 PATAMI dropped by 34% to RM88.2m (16.3 sen/share), exceeding our estimates slightly by making up 53% of full year forecast, but missed consensus estimates slightly by making up 46%.

Deviations

Largely in line.

Dividends

Net dividend of 3 sen/share declared, which came as a surprise as none was declared in the previous year’s corresponding period. Hence, bringing full year dividend payout to 6 sen/share. Ex-date on 23 Oct-13, payment on 22 Nov-13.

Highlights

YoY… Revenue declined by 23% YoY to RM432.1m, as the India IPP EP contract comes to the tail end. Earnings dovetailed the decline in revenue to contract by 24% to RM46.1m (8.5 sen/share).

QoQ… Revenue rebounded by 14%, buoyed by higher domestic construction activities. The lower MI charge, helped mitigated the effects of lower operating margin of 13.4% (1QFY13: 14.4%) and higher effective tax rate. As a result, earnings grew by 10% QoQ.

1HFY13… Revenue declined by 19% to RM810m mainly due to the tapering off in equipment components delivery of the EP contract for India IPP project. Operating margin compressed by 340 bps to 13.8%, hence earnings fell by a larger quantum of 34%.

Earnings visibility… Outstanding order book of ~RM1.64bn, translating to ~1.1x FY12’s construction revenue and ~1.2x order book-to-market cap ratio. Of note, there is ~RM160m (adjusted for 80% stake) balance of works for the India IPP EP contract.

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 believe that all eyes will be at the successful test-firing of the India power plant which is scheduled to take place by year end. In between, resolution of the coal FSA and potential contract wins for power-related civil works in Janamanjung will be a positive catalyst for Mudajaya’s stock price. Our 50% discount ascribed to its India IPP venture has more than taking into account of the India Rupee depreciation. Hence we are maintaining our BUY call on the company.

Valuation

TP of RM3.53 based on SOP valuation maintained (see Figure #3).

Source: Hong Leong Investment Bank Research - 29 Aug 2013