Mudajaya

〈热门板块〉研究团队昨晚解读了成荣集团（MUDAJYA 5085）最新企业消息，即包括了它开始在印度卖电和获得LRT 3工程合约两大利好。
成荣集团在上月也获得太阳能发电厂生产合约，每年可卖2200万零吉电流给国能。
研究团队确认成荣基本面和消息面都是利好，再观察其技术图表，其股价刚突破二百天平均线，呈现向上利好走势。
它的缺点是成荣集团过去三季都交出亏损业绩，累积每股亏损是47仙。
评估它的未来和过去三季的颓势，〈热门板块〉研究团队认为，该股是有望出现U转，因此研究团队决定特别拟出一项交易计划。
成荣集团（MUDAJYA 5085）
U转合理累积价位：RM1.08-RM1.10
小目标：RM1.40 大目标：我们将观察未来业绩而调整
止损保本价位：RM0.68

From: Maybank Investment Bank Research

Mudajaya: Two positive news;  worst is over?
 
Mudajaya was awarded a MYR58.3m contract to undertake the construction and completion of light rail transit line 3 (LRT 3) from Bandar Utama to Johan Setia (Package PC2). The scope of works includes manufacturing and precast pier caps and other related works. The project is expected to commence in 2Q17 and complete by end of 2019.

Separately, Mudajaya announced that its 26% associate company R.K.M Powergen Pte Ltd in India has commenced the sale of 200MW of electricity (for its Unit 1) to several power distribution companies in Uttar Pradesh. Note that R.K.M is developing a 4 x 360 MW coal-fired thermal power plant.

With the LRT 3 job award, Mudajaya will be able to build up a stronger pipeline going forward. Its order book stood at MYR2.5b at end-2016, including 1) MYR558.6m MRT job; 2) MYR810m road projects in Penang; and 3) MYR1.33b JV contract for Pan Borneo Highway in Sarawak, just to name a few.

For R.K.M, the power sale is a pleasant surprise to the investment community. It appears that the worst is likely over. The remaining 150MW of electricity sale (for Unit 1) is pending an approval from Uttar Pradesh Power Corporation, subsequent to the Champa-Kurukshetra 800 kV HCDC pole and 765 kV Jaipur-Bhiwani transmission line which was commissioned on March 27.

2017 is about execution. With a construction order book of >MYR2.5b and the absence of MYR98.4m impairment (previous claims against CMC Machipex S/B which was dismissed), Mudajaya’s construction unit will be able to report better earnings ahead. Note that this segment recorded a loss before tax of MYR123.2m in FY16.

For the power division, the group reported a loss of MYR143.2m in FY16 due mainly to equity and accounting losses from R.K.M. But with the commencement of electricity sale for Unit 1, losses should narrow going forward. Note that Unit 2 has also achieved Commercial Operation Date. Meanwhile, Unit 3 and 4 of the IPP are at advance stage of completion and power purchase agreements (PPA) are under negotiation.

Mudajaya is a potential turnaround play but execution risk still prevails. For the group to return to black, it hinges very much on the construction and power divisions. Investors may have to stretch their investment horizon as the PPA will need time to crystalise.

At current price, the stock is trading at 0.7x P/BV, on par with its 3-year historical average P/BV. Note that once the group returns to profitability, there could be a change in valuation matrix to PER, which could be another catalyst to share price.