Mudajaya Group - New EP job offsets poor 1H14

Date: 
2014-08-27
Firm: 
CIMB
Stock: 
MUDAJYA
Price Target: 
2.50
Price Call: 
HOLD
Last Price: 
0.12
Upside/Downside: 
+2.38 (1983.33%)
Target RM2.50 (Stock Rating: HOLD)

Mudajaya reported a disappointing 1H14 core net profit, which made up 61% of our full-year forecast and 52% of consensus when annualised. Cost overruns and variation orders led to a plunge in EBITDA margin, with further downside in 2H due to its depleting order book. Offsetting the negative results was an EP contract win for an IPP in Cebu worth RM375m. We slash FY14-16 EPS by 16-64%, keeping FY15-16 margins largely intact due to the new higher-margin EP contract and Indian IPP numbers. Our target price (still pegged to a 40% RNAV discount) falls as we update it for balance sheet items. In the medium term, the negatives from the results are likely to outweigh the likelihood of a domestic job flow recovery. Maintain Hold.

1H14 far below expectations 
Annualised 1H14 core net profit made up 61% of our full-year forecast and 52% of consensus. The performance was below expectations as we overestimated the EBITDA margin, which has downside risks in 2H. 1H14's 67% yoy drop in net profit was due to cost overruns and variation orders related to the group's power plant contract and MRT package. This was made worse by the depleting RM750m outstanding order book largely made up of lower margins. We slash our FY14 EPS as we now assume an average construction EBITDA margin of 2-3%. The total 6 sen single-tier interim DPS for 1H14 was in line. 

New EP contract balances out the weak results 
Mudajaya announced that it has secured a RM375m offshore equipment and procurement (EP) contract for the 40%-owned 62MW wind energy farm in Cebu, the Philippines. Though it forms part of our RM700m new job wins in 2014, the contract is a positive surprise as it is the first EP contract after India with lucrative pretax margins in the region of 20% by our estimate. It should also chip in c.RM35m to pretax profit p.a. from FY15. 

Recovery in domestic wins could trigger a turnaround 
Management clarified that the submission of subcontract tenders (c.RM400m) for the West Coast Expressway (WCE) was delayed from Aug to Dec 14, which was a negative surprise. But there is general optimism that domestic tender prospects could buck the trend, with the emergence of new tenders like the Ikano Centre in Cochrane (c.RM700m), a cooling system for TRX (c.RM100m) and a recovery in power plant tenders. There could be more visibility in Sep.

Discussions
Be the first to like this. Showing 6 of 6 comments

johnny cash

BULLSHITTING ALWAYS,,, LIES LIES LIES LIES AND LIES... THIS COMPANY ACTUALLY HAD BEEN BOYCOTTED FOR PROJECTS,, SINCE THE POISON PEN CASE BEFORE,,DUE TO REGULATORY PROBELMS

2014-08-27 13:22

johnny cash

Post removed.Why?

2014-08-27 13:25

matakuda

"We are not desperate for jobs" says Anto

2014-08-27 13:37

titus

After 7Quarter with no big project, wun the stakeholder pressure anto? or they all sit in the same boat and shake leg. Month end, take salary.

2014-08-27 14:25

warrior

New EP contract balances out the weak results

Mudajaya announced that it has secured a RM375m offshore equipment and procurement (EP) contract for the 40%-owned 62MW wind energy farm in Cebu, the Philippines. Though it forms part of our RM700m new job wins in 2014, the contract is a positive surprise as it is the first EP contract after India with lucrative pretax margins in the region of 20% by our estimate. It should also chip in c.RM35m to pretax profit p.a. from FY15.

2014-08-27 18:30

johnny cash

http://www.moneycontrol.com/news/business/sc-coal-verdict-banks-power-cos-likely-to-get-affected-_1187657.html

RMK POWERGREN NOT MENTION IN THE ABOVE LINK, HOPE MUDAJAYA IS NOT AFFECTED BY THE RECENT INDIAN COURT RULING???

2014-09-29 08:18

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