Mudajaya’s appeal comes from its transformation into a power player with good prospects for more such ventures given India’s appetite for energy. The icing on the cake would be success in landing projects in Vietnam and Saudi Arabia.
Mudajaya’s growth path now could emulates the likes of Gamuda, IJM Corp and YTL Corp in the early days before they ventured into IPP and other concession assets. We raise our FY10-11 forecasts by 21-34% for higher revenue and EBIT recognition from India and switch to RNAV valuation which gives us a new target price of RM6.65 (RM3.68 previously) based on a 30% discount to RNAV. We reiterate our
BUY recommendation with the potential share price triggers being (i) investors’ continued preference for higher-beta plays, (ii) more contract awards and (iii) financial closure for the balance of Phase 2 of the IPP. Mudajaya’s CY10-11 P/Es of around 6x are among the lowest in the sector and its ROEs are among the highest.
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