We take a look at Mudajaya’s potential job prospects amidst a slew of power plant initiatives in Malaysia as well as the latest developments in India’s coal industry. While we are positive on the group’s potential jobs flow from domestic power projects, we are maintaining our NEUTRAL stance pending the long-awaited signing of the FSA between its 26%-owned India unit RKM Powergen and CIL. Our FV is unchanged at RM2.88, pegged to a 50% discount to our SOP valuation.
Power jobs up for grabs. Following the award of the much anticipated RM3bn 1,071MW Prai power plant to TNB, we believe Mudajaya would likely tender for the civil works involved, which we estimate could cost as much as RM500m. With the plant
scheduled to commence operations by March 2016, we expect an official award by 1H13. Meanwhile, Mudajaya’s management confirmed that it would tie up with foreign partners to participate in the prequalification of the proposed 1,300MW power plant project in RAPID Pengerang, the submission for which will close by end-October. Should this materialize, it would mark the company’s maiden IPP venture in Malaysia, with potential recurring earnings estimated at RM200m-RM300m pa, assuming a 50% stake. This would be on top of the civil works involved, which management pointed out would be within RM800m-RM1bn.
Orderbook assumptions. Having secured over RM1.8bn worth of new jobs YTD, Mudajaya’s outstanding orderbook stands at approx. RM3bn, which includes RM800m from its existing EPC contract in Chhattisgarh, RM900m and RM500m on Tg Bin and Janamanjung power plant extension respectively as well as RM800m on the recently secured v3 viaduct package on KV MRT SBK line. We assume that there will be no more jobs winnings for the remainder of the year while our FY13 and FY14 orderbook replenishment stands at RM1bn p.a. respectively.
Light at the end of tunnel in India? As for India, the Prime Minister's Office has directed Coal India (CIL) to sign all fuel supply agreements (FSAs) by end-November. Based on the latest proposed FSA as approved by CIL’s board, CIL is committed to supply at least 80% of the power producers’ coal requirements. Penalty in the event of supply shortfall ranges from 1.5%-40% of the value of the shortfall. Of the 80% commitment threshold, 65% of the coal requirements will be sourced locally while the remaining 15% will be imported from international markets at cost-plus basis. While we find it comforting that the government is taking a proactive approach to resolve the existing deadlock, we remain cautious of further delays in reaching an amicable solution as India’s political climate continues to worsen amidst mounting pressure from the opposition parties to probe alleged wrongdoings by the Sonja Gandhi administration.
Power jobs up for grabs. Following the award of the much anticipated RM3bn 1,071MW Prai power plant to TNB, we believe Mudajaya would likely tender for the civil works involved, which we estimate could cost as much as RM500m. With the plant
scheduled to commence operations by March 2016, we expect an official award by 1H13. Meanwhile, Mudajaya’s management confirmed that it would tie up with foreign partners to participate in the prequalification of the proposed 1,300MW power plant project in RAPID Pengerang, the submission for which will close by end-October. Should this materialize, it would mark the company’s maiden IPP venture in Malaysia, with potential recurring earnings estimated at RM200m-RM300m pa, assuming a 50% stake. This would be on top of the civil works involved, which management pointed out would be within RM800m-RM1bn.
Orderbook assumptions. Having secured over RM1.8bn worth of new jobs YTD, Mudajaya’s outstanding orderbook stands at approx. RM3bn, which includes RM800m from its existing EPC contract in Chhattisgarh, RM900m and RM500m on Tg Bin and Janamanjung power plant extension respectively as well as RM800m on the recently secured v3 viaduct package on KV MRT SBK line. We assume that there will be no more jobs winnings for the remainder of the year while our FY13 and FY14 orderbook replenishment stands at RM1bn p.a. respectively.
Light at the end of tunnel in India? As for India, the Prime Minister's Office has directed Coal India (CIL) to sign all fuel supply agreements (FSAs) by end-November. Based on the latest proposed FSA as approved by CIL’s board, CIL is committed to supply at least 80% of the power producers’ coal requirements. Penalty in the event of supply shortfall ranges from 1.5%-40% of the value of the shortfall. Of the 80% commitment threshold, 65% of the coal requirements will be sourced locally while the remaining 15% will be imported from international markets at cost-plus basis. While we find it comforting that the government is taking a proactive approach to resolve the existing deadlock, we remain cautious of further delays in reaching an amicable solution as India’s political climate continues to worsen amidst mounting pressure from the opposition parties to probe alleged wrongdoings by the Sonja Gandhi administration.
Maintain NEUTRAL. All in, we are positive on Mudajaya’s potential jobs flow in 2013 as we foresee the group expanding its footprint within the domestic power industry by leveraging on its expertise in power-related project. However, we are maintaining our NEUTRAL stance for now as we reiterate our cautious stance on its IPP venture in India through its 26%-owned associate RKM Powergen. While we see some positives with the Prime Minister’s Office now exerting more pressure on both the coal and power ministry to come up with an amicable solution to resolve the coal saga, we would rather adopt a wait-and-see approach for the FSAs to be firmed up after rounds of disappointments. Our FV remains unchanged at RM2.88, pegged to a 50% discount on our FY12-based SOP valuation to reflect the inherent risks of potential delays in RKM Powergen’s commencement of operations in light of the unresolved coal woes.
Source: OSK
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