Mudajaya's earnings woes continued in FY15, with the 1Q results came in below our and consensus expectations. Cost overruns again blamed for the losses, which was a disappointment with the huge losses which already incurred in 4QFY14. To recap, the Group lost RM99.7m in 4QFY14 due to cost overruns in Janamanjung, and key projects such as MRT was not yielding the margins as expected. As for 1QFY15, it lost another RM19.7m which signaling that the operating environment is still challenging for the Group. More worryingly, the Unit 1 for its 4x360MW is still not commissioned as yet, again missed the target by 1H2015.

RM900bn outstanding orderbook. The Group's orderbook was lower at RM900m, from RM1.2bn in the previous quarter due to lack of new jobs. It has not yet clinched any new job YTD. Current outstanding orderbook is mainly coming from MRT and the other main job includes the offshore equipment procurement works for its 40%-owned 62MW Wind Energy Farm in Cebu, Philippines. Tender book is believed to be around c.RM8bn, primarily from the power industry (e.g. Tracks 3B & 4A, Pengerang, etc) worth c.RM1.5bn. Other jobs eyed include highways such as DASH and SUKE.

Indian Power Plant. Unit 1 commissioning again missed the target which is by 1H2015. That said, we believe that at least two units will be fired up by end-2015 and the remaining by early 2016. All told, due to the losses in in the current quarter, lack of new jobs and delay in the Indian Power Plant, we revised downwards FY15-FY16F earnings by -13% and -8%.

Maintain Neutral but lower our TP to RM1.40 (from RM1.60 previously) with a higher discount of 30% to its NTA. Near term, we believe that earnings will still be under pressure due to thinning outstanding order book and rising construction costs (including provisions).

Source: PublicInvest Research - 1 Jun 2015