Mudajaya down 4 sen after net profit slump, analysts slash earnings forecast

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KUALA LUMPUR (Dec 1): Shares of Mudajaya Group Bhd fell as much as 4 sen or 2.2% after the group reported net profit slumped 97% to RM1.07 million in its third quarter ended Sept 30, 2014 (3QFY14) from RM40.03 million a year earlier.

As at 10.54am, the counter is trading at RM1.80, down 3 sen or 1.64% with some 225, 000 units done.

Last Friday, Mudajaya net profit was dragged down by its construction segment. Revenue for the quarter fell to RM208.66 million, from RM391.46 million in 3Q13.

In a note to client today, CIMB Research slashed Mudajaya's financial year 2015 (FY15) and financial year 2016 (FY16) earnings by 15% and 23% to reflect the prolonged recovery in earnings prospects, as well as the maiden cash flow from the Indian IPP in FY15.

According to its projection, Mudajaya is expected to generate RM1.44 billion in revenue and RM107.9 million net profit for the financial year ending Dec 31, 2015 (FY15). In FY16, the group is expected to pull in RM159.5 million in net profit on the back of RM1.71 billion revenue.

"Despite our rollover to end-2015, our target price declines, still pegged to a 40% revised net asset value (RNAV) discount," it added.

CIMB Research is maintaining its "hold" call on the back of weaker visibility in the timing of job wins and inspite of the steep fall in share price.

"We remain concerned about Mudajaya’s weak job awards success rate in 2014 but this would be partly offset by the group's relatively unchanged total tender book of RM5 billion.

"Management's target of RM1 billion total domestic order wins in 2QFY14 to 4QFY14 looks unlikely to be achieved, suggesting possible delays in major job awards from 1H15 to 2H15," it added.

The firm expects Mudajaya's construction margin to remain under pressure in the next new quarters, only supported by the depleting RM1 billion outstanding order book and unrealised variation order (VO) claims for the Janamanjung and Tanjung Bin power plant extension projects.

Meanwhile, Public Investment Bank Bhd (PIBB) also revised downwards FY14 to FY16 earnings by 22.4%, 28% and 7.4% respectively to account for lower margins.

According to PIBB, Mudajaya is expected to pull in RM1.146 billion revenue and RM48 million net profit for the financial year ending Dec 31, 2014 (FY14). For FY15, Mudajaya is estimated to generate RM91.3 million in net profit on the back of RM1.28 billion in revenue.

For FY16, PIBB said Mudajaya may pull in RM1.16 billion revenue and RM104.8 million in net profit.

PIBB also expects Mudajaya's earnings to be soft for the next 2 to 3 quarters, with the projected commercial operation date for its first unit of the 4 x 360MW coal-fired power plant still kept at end-2014 but earnings will probably start to kick in meaningfully by 1H2015 (with all units fired up) which it believes will shore up the weak earnings performance currently.

Given all the above factors, PIBB maintained its neutral call on the counter with unchanged target price of RM2.25, which is pegged on parity to its net tangible assets (NTA).