KUCHING: Mudajaya Group Bhd’s (Mudajaya) prospects remain bright as the group is set to win bigger scale domestic projects in the near future.
SOLID EARNINGS: An artist’s impression of Menara Mudajaya located at Mutiara Damansara.
OSK Research Sdn Bhd (OSK Research) in a research report cited that Mudajaya has been pre-qualified for the new Low Cost Carrier Terminal (LCCT) terminal building with a value of RM700 million to RM800 million.
The research firm noted that other potential packages for the new LCCT include a taxiway and the track transit.
Meanwhile, on the Light Rail Transit (LRT) extension, OSK Research said Mudajaya will be tendering for some of the civil works at RM500 million to RM700 million per package and the supply of precast concrete structure.
It observed that Mudajaya has also submitted bids for two private finance initiative projects collectively worth RM3 billion.
Following a company visit, the research firm noted that the company’s overseas venture in Chhattisgarth, India is going to bear fruit as the Indian government would soon call for tenders of five sizeable Independent Power Producer (IPP) contracts of 4,000 Megawatt (MW) each.
OSK Research believed that Mudajaya intended to bid for the projects through its 26 per cent owned Indian associate, RKM Powergen Pte Ltd (RKM).
Additionally, it said part of the reason for its recent private placement at RM4.80 per share was to further strengthen its balance sheet to bid for these projects.
OSK Research noted that using the Chhattisgarth IPP venture as a benchmark, an engineering and procurement (EP) contract for a 4,000 MW power plant could be worth some RM9 billion.
On the other hand, Mudajaya announced on Thursday that it had been awarded a RM241.3 million project involving the construction works for the Boulevard Plaza development in Lot 3C7, Putrajaya.
The research firm observed that Mudajaya has a 51 per cent stake in the job while the balance is held by its joint venture partner, Bina Rezeki Sdn Bhd. It pointed out that profit recognition for the project will be based on the proportionate consolidation method.
Likewise, OSK Research stated the award of the contract was within its expectation as Mudajaya had received a Letter of Intent (LOI) for the same job in December 2009.
Thus, the research firm maintained its earnings forecast for Mudajaya while adding that the company was set to release its earnings results for the fourth quarter of financial year 2009 on February 10, 2010. The research firm was optimistic that the company will register strong earnings for the quarter.
It continued to favour the outlook of the company based on estimates that the company is able to register a compound average growth rate (CAGR) of 75.6 per cent, sizeable orderbook balance of RM5.2 billion, above industry profits margins, superior return-on-equity (ROE) of 30 per cent, net cash position and stable recurring income over the medium term.
Therefore, OSK Research pegged its target price for Mudajaya at RM6.48 per share.