Analysts turn positive on Mudajaya’s India power plant

Construction firm Mudajaya Group Bhd, whose Indian power plant had drawn some controversy in the past, is being rated positively by analysts after a briefing last week.

Industry sources said the company was also organising a trip for analysts and fund managers to the plant in India.

“This has been in planning for some time as the plant isn’t very accessible. They have now finalised the logistics and lined up key Indian parties, such as Indian bankers who have funded the power plant, to speak to the Malaysian parties,” a source said.

To recap, Mudajaya ventured into the Indian power sector by taking a 26% stake in RKM Powergen Pvt Ltd via subsidiary Mudajaya Corp Bhd in undertaking a 1,440-MW coal-fired independent power producer (IPP) project in Chhattisgarh, India. The project comprises four generating units with a nominal capacity of 360 MW each.

The Indian project, however, did not start off well and hit some bumps. In 2010, Mudajaya went to great lengths to explain the power plant project it is undertaking with its partner in India.

It was also probed by the Securities Commission (SC) as a nine-page, anonymously-written letter made its rounds. The company was subsequently cautioned that it must ensure compliance in future.

Among the issues brought up in the letter was the high price of RM871mil Mudajaya paid for its 26% stake. That compares with the RM273mil RK Powergen paid for its 74% stake.

Mudajaya has since clarified that the premium it paid was justified as it included approvals, the IPP contracts, coal cost savings and a chance to enter India’s power industry.

For the financial year ended Dec 31, 2011, Mudajaya posted a net profit of RM231mil on revenue of RM1.34bil.

Meawhile, CIMB Research said that positives news from the group’s maiden briefing on Friday reinforced its trading-oriented buy recommendation.

“Though there were no major surprises, we were encouraged that management was more upfront on its target jobs and strategies,” it said.

CIMB Research said it appeared there was a high chance of more power plant-related jobs in the pipeline, which should add to the expected positive news flow from the rollout of other jobs under the 10th Malaysia Plan and the Economic Transformation Programme.

“There should also be excitement on the potential winners of the MRT elevated packages which will be awarded over the next six months. We make no changes to out earnings per share forecasts as we continue to assume RM1.5bil worth of new jobs in 2012,” it said, adding that project wins continued to be the stock’s key potential catalyst.

Hong Leong Research said the progress on the India IPP had been substantial, with some US$570mil worth of EP works outstanding equivalent to 40% completion.
Source: Online star


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