Regarding MudaJaya

Mudajaya has been in the limelight lately as its share prices had been whacked down. ( See collection of news: Mudajaya tumbles on ‘poison-pen letter’ )

Ahh.. I did write about Mudajaya back on 13th May 2010: What Do I Think Of Mudajaya's Earnings Performance.... It wasn't a good posting because I made a boo-boo! Yeah I did it. I made an error! Strangely I wasn't corrected until much later. Errata Made On The Posting "What Do I Think Of Mudajaya's Earnings Performance..." My error was because I did not qualify WHY Mudajaya's cash balances! Yes, Mudajaya cash balances improved greatly because it was boosted by a share placement issue. Yeah.. I would say that was a piss poor posting from me.

Anyway, it's interesting because Mudajaya has been plunging and Mudajaya has signalled its intent to defend its share price by purchasing 1,002,800 shares (price range 4.55-3.80) on the 5 Aug and another 200,000 shares on the 6 Aug (price range 4.05-4.06)

Here are the charts for Mudajaya.

Daily chart for Mudajaya.

The 5 mins.. (yeah.. MudaJaya traded with a nice gap up on Friday!)

More 5 mins...


Time to travel back in time.

Mudajaya was listed on May 2004. Here's Maybank's IPO notes on it: Mudajaya Group Bhd (IPO Price: RM1.28, FV: RM1.92): The next IJM?

An article on Star Business

• Monday September 27, 2004
  Change in corporate focus for Mudajaya after MBO
  By Angie Ng
  
  SINCE a management buyout (MBO) in July 2002 that saw the transfer of the majority ownership of Mudajaya Group Bhd to the management team, Mudajaya is seeing the realisation of some of its strategic plans that will spearhead a change in the group’s corporate focus to make a bigger thrust into property development.
  
  It was formerly a subsidiary of Mulpha International Bhd before its managing director Ng Ying Loong and other senior management team undertook the MBO at a cost of RM113.6mil.
  
  Mudajaya was listed on the main board of Bursa Malaysia in May.
  
  The group, which has made a bigger foray in the property sector with the launch of various new phases in its Batu Kawah New Township in Sarawak, has also set sight on moving up the property industry ranks by venturing into the high-end residential sector.
  
  “With a bigger exposure in the property sector, this will ensure steady income streams and a cushion against the cyclical nature of the construction industry,” Ng said.
  
  In the next one to two years, contribution from the property division to group earnings was expected to double from the current 10%.
  
  Currently, construction made up about 80% to 85% of the group earnings while the manufacturing and trading of construction-related materials contributed about 5% to 10%.
  
  “Our target is to maintain a contribution of between 25% and 30% from the property division to create a healthier balance for cash flow,” he said.
  
  Mudajaya, a Class A contractor, has a portfolio of more than RM3bil worth of construction contracts in Malaysia and India.
  
  The projects included highways, roads, bridges, power stations, buildings, infrastructures, marine structures, dams and restraining structures.
  
  It has a gross order book of more than RM900mil over the next two years, including RM276mil worth of contracts in India.
  
  Analysts who track the stock are optimistic of Mudajaya’s earnings potential going forward and expect annual earnings growth of 10% to 15%.
  
  Mudajaya is in good financial footing and is in a net cash position with total cash balance of RM25mil and zero borrowing.
  
  “The group registered a four-year revenue and net profit compounded annual growth rate of 20.6% and 51.9% respectively and has remained profitable over the past 20 years.
  
  “Its venture into property development in a bigger way augurs well for its performance after the Government’s recent cut back on infrastructure spending,” an analyst with a foreign brokerage said.
  
  With a price to earnings ratio of less than seven times, he said Mudajaya offered good upside potential to investors.

Feb 2007: Quarterly rpt on consolidated results for the financial period ended 31/12/2006

This is how MudaJaya's compiled earnings were looking back in 2007.

Rather lacklustre and uninspiring, yes? In fact, fy 2005 earnings was projected to be around 29 million.

But despite the apparent lack of earnings, MudaJaya's earnings was rather happening. A month earlier..

• Wednesday January 10, 2007
  
  Mudajaya surges on India venture, new jobs
  
  By IZWAN IDRIS
  
  PETALING JAYA: Shares in engineering and construction firm Mudajaya Group Bhd surged to a new high yesterday, buoyed by bullish outlook on its venture into India and anticipation of new contracts to be secured at home.
  
  The stock jumped 21 sen, or 13%, to RM1.81 on volume of 1.76 million shares.
  
  “Mudajaya is a cheap entry into India's power industry,'' CIMB Securities said in an update yesterday.
  
  The research house has raised its year-end target price for Mudajaya to RM2.15 from RM1.52 on upward revision to its forward net profit estimates.
  
  The new target price values the stock at 10 times projected earnings in its financial year ending Dec 31, 2007 (FY07).
  
  “We have revised our net profit estimates by 19% for FY07 and 43% for FY08, after factoring in potential construction profits from phase 1 of the group's independent power producer (IPP) project in India,'' CIMB said.
  
  Last month, India's Chhattisgarh State Electricity Board approved the power purchase agreement (PPA) to buy electricity from the 300MW power plant under phase 1 of the IPP project, developed by a joint venture in which Mudajaya has a 26% stake.
  
  Mudajaya was awarded the engineering and procurement (E&P) works for the project estimated at RM520mil. This lifted its orderbook value to RM850mil......

Since then Mudajaya's earnings and the stock did rather well. Here's an updated table.

And the earnings has certainly 'improved'! This issue was noted. From the compiled collection of news, Mudajaya tumbles on ‘poison-pen letter’, one statement stands out.

• Some analysts have also observed that Mudajaya’s profit margins are exceptionally high compared to industry standards, and its much bigger peers.

Now since I made an error of omitting the fact that MudaJaya's cash was boosted by share placement, I decided to include a column (Placement) to show how much money Mudajaya reaised from its share placement and the last column indicates where the bulk of money goes -investment in associates. (Inv. Asso). (The last placement was made at a price of 4.80)

There's one other thing.

MudaJaya is stated to be 'debt free'. Some rather interesting issues is that its JV partner in India is the one getting the loans for their project.

• Mudajaya Secures Loan For India Project
  PETALING JAYA: Mudajaya Group Bhd has secured a RM47mil loan facility from Vijaya Bank of India to part-finance the setting up of the 350-megawatt (MW) Unit-1 coal-based thermal power plant in Chhattisgarh, India...more
• Mudajaya Gets RM866m Term Loans
  KUALA LUMPUR: Mudajaya Group Bhd’s energy joint venture in India has secured term loan facilities to the tune of Rs 10.9 billion (RM865.8 million) for the construction of a 350-megawatt unit one coal-based thermal power project.…….more

The Star Business article on Friday: Mudajaya shares hit 9-month low on ongoing SC probe

• Friday August 6, 2010
  Mudajaya shares hit 9-month low on ongoing SC probe
  By YVONNE TAN
  
  PETALING JAYA: Concern about the ongoing investigation by the Securities Commission (SC) on Mudajaya Group Bhd resulted in Mudajaya shares hitting its lowest level since last November. Its share price ended trading yesterday at RM3.92.
  
  This is a decline of 31% since news first broke about the SC investigation in the weekend of July 24. The decline has wiped out more than RM650mil in Mudajaya’s market capitalisation.
  
  The SC said it had no immediate comment when queried by StarBiz. However, the SC had earlier confirmed it was investigating Mudajaya.
  
  The SC’s surveillance unit is said to be looking into alleged improprieties by the property and construction outfit in relation to its investment in an Indian independent power producer.
  
  StarBiz obtained a copy of a letter with these allegations, believed to be written by an insider with knowledge of the company’s operations.
  
  The SC is believed to also have a copy of the same nine-page, anonymously-written letter.
  
  The letter questioned, among others, Mudajaya’s Indian IPP investment of RM864mil and the generation of inflated profits from it.
  
  It alleged that while Mudajaya paid a premium for its stake, there was an arrangement whereby Mudajaya would receive lucrative engineering contracts from the IPP, which would more than make up for the huge premium paid.
  
  The letter said the contracts would be awarded to a Mudajaya subsidiary in Mauritius but that this could lead to a “tax transfer pricing violation” in India, considering the tax-free status of Mauritius.
  
  When StarBiz contacted Mudajaya managing director Ng Ying Loong yesterday, he said the company had no comment on the allegations.
  
  “We don’t comment on (anonymous) letters. We have met the SC and clarified the matter. We are waiting for its response. We are confident that we are doing the right thing,” he said.
  
  Ng is believed to have set up a meeting today with analysts who cover the stock to provide further clarification.
  
  Research houses CIMB Research and OSK Research have maintained their buy calls on Mudajaya even after news on the SC investigation came out.
  
  CIMB said in a report on Aug 2 that Mudajaya’s “management’s move to help clear the air (via a news report last weekend) was positive and it is comforting that management is being proactive and is willing to give full cooperation to the SC”.
  
  “At this juncture, there is no major cause for concern,” it said.
  
  CIMB also said that it had learned that the SC had already requested preliminary information from the group’s auditors.
  
  “The issue is still at the surveillance stage and has not progressed to a full-scale investigation.
  
  “However, the process may not be wrapped up so soon,” CIMB said in the report.

How?

The allegations made in the so-called poison letter is rather interesting but as it is, I believe that there's no much to be said.

The only concern is perhaps the receivables which had increased significantly since its fy 2007 and needless to say, if the allegations were indeed true!