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Mudajaya's Power Plant in India

Mudajaya's Power Plant in India

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Published by Ahmad Cendana
Report by CIMB analyst dated 21 May 2012 after a visit to India and a briefing by Mudajaya.
Report by CIMB analyst dated 21 May 2012 after a visit to India and a briefing by Mudajaya.

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Published by: Ahmad Cendana on May 31, 2012
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05/31/2012

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Construction
MALAYSIA
May 21, 2012
IMPORTANT DISCLOSURES. INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT.
Designed by Eight, Powered by EFA
Enjoying an Indian summer witha power plant tour
Our tour of Mudajaya’s power plant 
site left us encouraged by the physical progress of the 26%-owned power plant which should not seeany
major delays after last year’s road 
bump. All four 360MW unitsshould begin selling power by 2H13.
 We continue to value Mudajaya at a40% discount to its RNAV. Clarity onthe progress of the Indian IPP andpotential power cashflows shouldrenew interest in the stock. Mudajayaremains a Trading Buy and not anOutperform because of the politicalrisks for the construction sector. Thekey catalyst is project awards.
What Happened
Last week, Mudajaya
’s MD Anto
Joseph and CFO Kenny Lo took sevenanalysts and fund managers on athree-day trip to India. Robert KaviSingh, project manager and
Mudajaya’s site represen
tative led thetour of the 300-acre site of the26%-owned 1,440MW coal-firedpower plant in the district of JanjgirChampa in Chhattisgarh. It is amongseven coal-fired power plants comingup in the area.Unit 1 is targeted for testing by end-12.Construction of most key componentsis already in full swing. Mainstructures, i.e. boilers, boiler drums,chimneys, cooling systems and ESPs,are targeted to be fully completed by early 2013. Equipment/procurementof imported components (turbines, boilders and generators) undertaken by Mudajaya will be completed by end-12.
What We Think
Though there were no major surprisesduring the visit, we are encouraged by the progress on site. Details on thetargeted timeline for physical worksprovided more assurance that theproject is on schedule for full physicalcompletion and testing by mid-2013.
What You Should Do
 Accumulate Mudajaya. The stock isamong the cheapest in ourconstruction coverage. Medium-termcatalysts are local job awards and thesigning of a fuel supply agreement(FSA) for the Indian IPP.
CIMB Analyst
Sharizan Rosely
T
(60) 3 20849864
E
sharizan.rosely@cimb.com
Mudaaya Grou
FLASH NOTE
MDJ MK / MJYA.KLCurrent 
RM2.51
SHORT TERM
(3 MTH)
LONG TERM
Market Cap Avg Daily Turnover Free Float
Target 
RM3.45
US$439.9m US$1.16m 47.9%
Previous Target 
RM3.45
RM1,379m RM3.54m 549.3 m shares
Up/downside
 
37.5%
 
1.62.12.63.13.64.15867768594103Price CloseRelative to FBMKLCI (RHS)
Source: Bloomberg 
246810
May-11Aug-11Nov-11Feb-12
   V  o   l  m
 
Financial Summary
Dec-10ADec-11ADec-12FDec-13FDec-14F
Revenue (RMm)8691,3471,5841,8762,137Operating EBITDA (RMm)284.1298.7344.7383.8376.7Net Profit (RMm)215.6231.0268.9321.1372.4Core EPS (RM)0.390.420.490.590.68Core EPS Growth25.8%7.2%16.4%19.4%16.0%FD Core P/E (x)4.575.215.124.293.70DPS (RM)0.0410.0800.0850.0900.095Dividend Yield1.64%3.19%3.39%3.59%3.78%EV/EBITDA (x)2.122.852.021.160.45P/FCFE (x)NANA58.3511.3015.50Net Gearing(33.5%)(15.4%)(12.6%)(16.6%)(17.0%)P/BV (x)1.431.451.150.920.74Recurring ROE39.3%27.7%25.1%23.8%22.3%% Change In Core EPS Estimates 0%0%0%CIMB/consensus EPS (x) 1.091.061.02
 
2.51
3.45
1.803.53Target
52-week share price range
Current
 
SOURCE: CIMB, COMPANY REPORTS
Share price info
Share price perf. (%) 1M 3M 12M
Relative -1.8 -13.3 -29.0Absolute -6.0 -14.9 -29.6
Major shareholders % held
Dataran Sentral (M) SdnBhd24.3Mulpha InfrastructureHoldings Sdn Bhd22Brahmal Vasudevan 5.8
 
Mudajaya Group
May 21, 2012
2
Visit to RKM’s power plant site
 We began the journey from Kolkata to the state of Chhattisgarh, travelling550km (two hours) westbound on a chartered Cessna plane. We landed at O.P.Jindal airport, a private airfield owned by Jindal Power & Steel, in the district of Raigarh. We continued via road on National Highway 4 (NH4) using 4x4s andminivans for another 22km (45 minutes) before we reached the village of Ucchpinda in the district of Janjgir Champa
 where RKM Powergen’s plant is
located. We observed the location of main rail lines, typically located near power plantsites, as well as clusters of villages, mainly along NH4. Raigarh has a populationof 1.2m and spans 7.1k sq km. Its population density of 179/ sq km is among thehighest in Chhattisgarh. Janjgir Champa has a population of 1.3m with a totalarea of 3.9k sq km. Its population density of 342/ sq km is the highest amongthe 18 districts of Chhattisgarh. It took 3-4 hours to get to the site, where we were greeted by temperatures of up to 45
˚C
.
Figure 1: Map of India
 –
highlighted state of Chhattisgarh Figure 2: Chartered Cessna plane landed at O.P. Jindal airport
 
SOURCES: WIKIPEDIA, SOURCES: CIMB
 
Figure 3: Example of cluster of villages along NH4 Figure 4: Rail line near one of the power plants
 
SOURCES: CIMB SOURCES: CIMB
 
 
Mudajaya Group
May 21, 2012
3
Industrial players the key producer of power
En route, we noticed a few coal-fired power plants that have already beenoperational for about
five years. The power plants larger than RKM Powergen’
s1,440MW facility are (i) Jindal Steel and Power which is located near O.P.Jindal airport, and (ii) Monnet Ispat & Energy Limited, an industrialconglomerate, located along NH 4. The emergence of these power plants has benefited the locals through job creation and the building of schools and otheramenities via corporate and social responsibility (CSR) programmes.
 We understand that under India’s 11
th
Plan, more power plants are needed tocater to (i) the general shortage of power given the low reserve margin of 12%(low 
er than Malaysia’s reserve margin of 
41%, (ii) and the increasing number of industrial offtakers. This triggered the building of more coal-fired facilities
(including RKM Powergen’s) further inland
and closer to water resources andthe coal belt.
Figure 5:
View of Jindal Steel and Power’s power plant
Figure 6:
Monnet Ispat & Energy Ltd’s power plant
 
SOURCES: CIMB SOURCES: CIMB
 
Seven incoming power plants including RKM’s
 
Over the next 1-2 years, there will be six new coal-fired power plants(1,000-
1,600MW each) apart from RKM Powergen’s 1,440MW facility. Among
them are (i) DB Power, (ii) SKS, (iii) Athena, (iv) Visa Power, and (v) Vedantha. We understand that despite delays due to weather conditions and site/workerissues in 2011, RKM Powergen will be the first plant to come onstream in 2013.

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