Results

FY13 PATAMI declined by 36% to RM151.2m (27.9 sen/share), missing both ours and street’s estimates by making up 90% of full year forecast.

Deviations

Due to lower than expected construction contributions.

Dividends

Net dividend of 3 sen/share declared. However, the payout is considered for FY14. Hence, FY13 total payout was 9 sen/share (1Q: 3 sen; 2Q: 3sen; 3Q: 3 sen). Ex-date 23 Apr- 14, payment on 21 May-14.

Highlights

Quarter review… 4Q revenue fell by 15% QoQ but grew by 10% YoY to RM334.3m. The sequential decline in revenue was due to its dwindling outstanding order book which stood at RM1.2bn as of 4QFY13, translating to 0.8x FY13’s revenue (see Figure #3). As contribution was largely derived from local projects which have lower margins, 4Q operating margins fell to 9% compared 13% in the previous quarter and 16% a year ago. With lower margins, 4Q PATAMI shrank further by 51% YoY and 43% QoQ to RM22.9m (4.2 sen/share).

FY13 review… FY13 revenue shrank by 7% to RM1.54bn, likewise due to the same reason for the decline in 4Q revenue. As a result of lower margins and decline in revenue, PATAMI fell further by 36% to RM151.2m (27.9 sen/share).

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

FY14 earnings slashed by 36.8% to RM105.3m from RM166.6m previously due to timing in profit recognition for new contract win while introducing FY15 earnings.

Rating

BUY

Although Mudajaya lacks new contract wins and order book replenishment has been a growing concern, the company’s prospects in securing power-related civil works for Janamanjung and Project 3B (assuming 1MDB wins) remains strong. The other strong catalyst would be the successful test firing of its India IPP. We are reiterating our BUY call on Mudajaya as we believe that the company is able to successfully replenish its order book and commission the India power plant.

Valuation

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

Source: Hong Leong Investment Bank Research - 26 Feb 2014