Mudajaya Group ... Dec09

Recent Developments
• Mudajaya announced that the group, in a JV with Bina Rezeki Sdn
Bhd, has received a letter of intent (LOI) for an MYR241.3-mln
contract to design and construct the Boulevard Plaza Development at
Putrajaya. The project is expected to be completed by Dec. 31, 2011.
Mudajaya has a 51% interest in the JV while its partner, Bina Rezeki,
holds the rest.

• With the new contract, Mudajaya’s outstanding order book stands at
MYR5.5 bln, where the Indian IPP project accounts for about 60%.
We can expect positive newsflow for local and overseas projects
ahead: we understand the group is actively negotiating for two or more
local jobs and is bidding for USD500 mln worth of infrastructure and
building works in Vietnam and some MYR500 mln in Saudi Arabia.

• On its IPP India project, the plant is scheduled to commence
operations in 2012, with construction profits kicking in significantly over
the next two years. Mudajaya’s associated company, RKM, has raised
a total of MYR1.8 bln in external financing so far (for Phase 1 and
partially for Phase 2) and is at an advanced stage of securing the
remaining loan of MYR1.9 bln for Phase 2 to achieve financial closure.

• While we keep our 2009 earnings forecast largely unchanged, we
increase our 2010 forecast by 4% to incorporate the above newly
secured construction project in Putrajaya. We have also assumed
MYR400 mln worth of jobs wins in 2010.

Recommendation & Investment Risks
• Standard and Poor's maintain our Buy recommendation with a higher 12-month target
price of MYR5.60 (from MYR4.90). Although the share price has risen
by about 40% over the past three months, the stock deserves
consideration, given that its valuations are still attractive, in our view.
The group, which is presently trading at projected PER of 9.4x for
2010, has yet to reflect its near-term growth potential (2-year forward
EPS CAGR of more than 50%).

• Standard and Poor's have increased our target PER multiple to 11x (vs. 10x previously) to reflect the group’s strong order book replenishment prospects and
the positive outlook for the construction industry on the back of further
rollout of government sponsored projects. Our target price also
includes a projected net DPS of 3 sen.

• Standard and Poor's believe Mudajaya’s fundamentals remain intact, with strong
earnings visibility supported by a record-high order book, recurring
income prospect of its IPP India project and healthy balance sheet (net
cash of MYR149.9 mln at end-September 2009, zero gearing).

Earnings Outlook
• Risks to our recommendation and target price include delays in the
execution of new contracts, in particular the Indian IPP project and in
the construction progress of existing contracts. Other risks include
higher-than-expected volatility in construction material prices and fuel
costs.

Summary:
Mudajaya Group (Mudajaya) is an investment
holding company with subsidiaries engaged in civil
engineering and construction, property development, and
manufacturing and trading of construction materials. The
stock is a component of the FBM EMAS and FBM 70 Index.