Results

9MFY13 PATAMI declined by 32% to RM128.3m (23.7 sen/share), meeting our estimates by making up 76% of full year forecast, but missed consensus estimates by making up only 70%.

Deviations

Largely in line.

Dividends

Net dividend of 3 sen/share declared, higher than previous corresponding’s quarter payout of 2.5 sen/share. Hence, bringing full year dividend payout to 9 sen/share (1Q: 3 sen; 2Q: 3 sen), which has met our full year dividend forecast. Ex-date on 21 Jan-14, payment on 20 Feb-14.

Highlights

Quarter review… Posted 3Q revenue of RM391.5m which grew by 11% YoY but slowed down by 9% QoQ. As the India IPP project has reached the tail end, operating margins fell to 13% compared 19% a year ago, as revenue was largely derived from local projects which have lower margins. PATAMI grew by 28% YoY and 13% QoQ to RM40.0m.

9MFY13 review… 9M revenue shrank by 11% to RM1.2bn, likewise due to the same reason for the decline in 3Q revenue. As a result of lower margins and decline in revenue, PATAMI fell by 32% to RM128.3m.

Reaching crucial moment… Despite the decline in earnings over the past 3 quarters, Mudajaya’s inflexion point will be upon the successful test firing of its India power plant, whereby Phase 1 (360MW) is scheduled for completion by 1QFY14. The company has overcome many hurdles to reach this stage.

More than power… Besides the India IPP catalyst, the recent RM1bn MTN facility will also provide Mudajaya the firepower to undertake more Private Financing Initiativerelated projects ranging from power to infrastructure projects. The company remains a strong contender to clinch civil works worth RM700m for the next 1,000MW expansion phase of Janamanjung.

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.

Forecasts

Unchanged.

Rating

BUY

We are reiterating our BUY call on Mudajaya as we are encouraged by the progress towards successfully commissioning its power plant, thereby unlocking its value and also positive on potential contract wins.

Valuation

TP of RM3.53 based on SOP valuation maintained (see Figure #4).

Source: Hong Leong Investment Bank Research - 28 Nov 2013