Mudajaya Oh Mudajaya

Written by Chong Jin Hun of   
Thursday, 10 January 2013 10:25

KUALA LUMPUR (Jan 10) –  MUDAJAYA GROUP BHD [] climbed as much as 3% among top gainers on Thursday morning after the builder said it is pursuing power plant projects in Myanmar.

At 10.13am, Mudajaya was traded at RM2.74 with some 1.4 million shares changing hands after rising as much as eight sen to RM2.76 earlier. The stock is the sixth-largest advancer across Bursa Malaysia.

Analysts said Mudajaya’s business plans in Myanmar make commercial sense as electricity coverage in the country is at a mere 13% based on World Bank reports.

"With a huge power shortage in Myanmar coupled with its gradual opening economy, we believe this will present a good power plant avenue to Mudajaya.

"Country risk in Myanmar is the key risk, we believe. This is especially so with regards to the government’s willingness in honouring its contracts. Although no longer under the military rule, Myanmar is far from a proper democratic society," Alliance Research Sdn Bhd analyst Jeremy Goh said.

Alliance is maintaining its "buy" call and fair value of RM3.78 for Mudajaya shares according to Goh.

Mudajaya told the exchange on Wednesday that its wholly-owned subsidiary Mudajaya Corp Bhd has signed a memorandum of understanding (MOU) with the Myamar government and Malaysian  Koon Yew Yin to establish power plants in the neighbouring country.

Under the MOU which is valid for a year, Mudajaya said the parties intend to set up coal-fired and solar-powered independent power plants within the Mandalay region and other suitable areas. As such, Mudajaya and Koon plans to set up a joint-venture company on a 70%-30% basis.

Mudajaya said it will prepare a feasibility report for the Myanmar authorities’ perusal within nine months.

Alliance's Goh said it may take some time before proposals in the MOU materialise. He said should the projects make commercial sense for Mudajaya, the company will still need to secure lawmakers' consent and financial closure, and structure the power purchase agreement.

Hence, the research house is maintaining its earnings estimates for Mudajaya for now, according to Goh.