Large Scale Solar (LSS): What To Expect

Malaysia targets at least 20% renewable energy consumption by year 2025. Large Scale Solar (LSS) program is one of the projects which plays a crucial role in achieving this target.

At the end of 2016, only 2% energy comes from renewable source.

LSS was first introduced in March 2016. So far 3 rounds of bidding have been completed. Bidding process of LSS4 is currently under way and the result is expected by the end of this year.

Successful bidders have to build, own and operate (BOO) the large solar farms. A power purchase agreement at a fixed rate for 21 years will be signed with TNB.

There are many listed companies planning to diversify and share the cake of this renewable energy business. I read that Vizione, Pestech, OSK and ILB have plans to bid for LSS3.

Of course all of them failed as only one listed company won the bid in LSS3, which was Cypark. 

Mudajaya Year End Sales?

Mudajaya sparks into life again!

After about 2 months of selling pressure, which saw Mudajaya's share price fell almost 50% from RM3.40 to RM1.80, buying interest seems to flock in for the past few days.

Mudajaya has made a big change in its board as the former managing director, Ng stepped down and is replaced by Anto, who is previously a joint MD and has been serving the company for 18 years. Investors may be worry about this changes, as reflected from the sharp drop in its share price.

At the price of about RM2, Mudajaya is deemed to be very cheap at PE of around 5. Its cash is increasing and it has no debt. Not long ago most analyst gave its fair value at RM5-7.

After Janamanjung, there is optimism that Mudajaya will secure more contracts in the subcontract work of power plant extension project, especially Tanjung Bin. The issue of delay in India's project is solved and it is expected to get more projects there.

    Tanjung Bin next?

Recently the company is actively buying back its shares and a few non-executive directors are increasing their stake in the company. There are rumour that Mudajaya may be a target for merger or acquisition due to its attractive price at the moment.

If you look at Mudajaya's share price chart, the volume is significantly higher for the recent 2 months, especially for the past one week. Though it may mean panic selling during this period which has dragged the price down, but it can also be some big players accumulating its shares. When a good stock is more heavily traded compared to before, I think it is usually a good sign.

Mudajaya latest target price:

	RM
CIMB	4.81
OSK	2.82

Mudajaya's target price has been cut again and again due to the overall gloomy global economy. However, it is still quite attractive compared to the current share price.

From technical point of view, the MACD is about to crossover, the RSI is below 30% and the volume increases. However, it still hasn't break its downtrend line.

       Mudajaya: still in downtrend

As long as the fear in Euro and US is not settled, any stocks will continue to retreat, including Mudajaya. The best strategy should be buying in stages into a good stock.

Mudajaya: Easy to Success?

Mudajaya recently on 2nd June 2011 secured its first contract in 2011: a RM720 million civil works for Manjung power plant extension project. However, its share price are down for the last 3 days from a high of RM4.75 to close at RM4.58 yesterday. Various research houses give a target price of above RM7, but Mudajaya's share still find it hard to breakthrough and remain above RM5... Why?

Mudajaya financial data:

 

	2008	2009	2010	2011F
Revenue (mil)	422	720	869	1104
Net profit (mil)	45	117	208	287
EPS c	12	31	51	70
DY %	1	1	1.6	2.8
ROE %	26	34	27	37

The 2011 forecast is by CIMB. There is a substantial growth in net profit since 2008 along with its revenue. The ROE is persistently above 25%. However the dividend is low, with only 14.5% payout from its 2010 profit. Perhaps investors don't like this. 

In 2010, Mudajaya made a huge progress overseas by securing the Independent Power Producer project in India worth RM3.4b. Other than India, Mudajaya is also actively exploring business opportunity in Middle East, Laos, Vietnam, Indonesia etc.

Mudajaya's current order book:

Projects	Contract value (RM m)	Balance of work (RM m)	Completed (%)
Chhattisgarh IPP - EP works	3402.3	2982.9	12.00%
KL-Kuala Selangor Expressway (KLKSE) - Package 1 & 2	958	166.1	83.00%
Batu Kawah New Township (Kuching, Sarawak)	350	141.2	60.00%
Boulevard Plaza Development, Putrajaya (51% JV)	241.3	77.5	68.00%
Crest Jalan Sultan Ismail - building project	219.7	102.7	53.00%
KLIA Spur Line Guideway extension	45.2	2.8	94.00%
Vietnam - Internet New City project	188.7	188.7	0
Hospital, Pahang	75.4	53.1	30.00%
Mutiara Damansara - Corporate office	41.2	28.3	31.00%
10 Damansara - Housing project	24	14.7	39.00%
Pahang Felda - Housing project	900	900	0
Kuantan Koperasi Tanah - Housing project	141	141	0
Civil works Janamanjung extension	720	720	0
Total	7306.8	5518.9

Currently Mudajaya still has RM5.5b projects on hand and has the potential to bag contracts for power plant and LRT extension work.

Mudajaya will pay out 2x 15% single tier dividend (3 cents) in June. The ex-dates are 21 & 28 June 2011. Though a total of 6 cents dividend are paid in this period, it is not very attractive as the share price is RM4.58 giving a yield of only 1.3% if you buy its shares now. This may not boost the share price up significantly.

    Mudajaya: in consolidating mode

However, Mudajaya proposed 1 bonus share for every 3 existing shares and this is already approved by Bursa on 31 May 2011. It should be approved by shareholders as well during the EGM on 22 June 2011. Will it give the share price a boost? Well, today it looks very likely the price will close down for the fourth consecutive days.

The company announced its Q12011 results 2 weeks ago and its net profit drops 18% QoQ. Has the growth reached its peak? Well, it looks unlikely if the global economy is still recovering. The government has been slow in awarding construction projects and most construction counters also do not perform well in Bursa this year. Can start to accumulate when it shows reversal of current downtrend?