Market speculation of a potential change in a substantial shareholding of Mudajaya Group Bhd has sent shares of the construction-cum-independent power (IPP) player surging.
Mudajaya was the top performing stock on the local bourse yesterday, rising 55 sen or 10% to RM5.71 on heavy volume of over two million shares.
During intra-day trading, its shares hit a fresh 12-month high of RM5.81, four times more than the RM1.50 levels it traded at a year ago.
The sharp rise in its share price was fuelled by unconfirmed market speculation of a potential change in its substantial shareholding.
Based on its 2009 annual report, Mudajaya’s major shareholders include Dataran Sentral (M) Sdn Bhd with a 24.43% stake and Mulpha Infrastructure Holdings Sdn Bhd with 21.45%. Dataran Sentral’s shareholders include managing director Ng Ying Loong and executive director Wee Teck Nam.
Due to its own fledgling power interests in India, unconfirmed market speculation is that IPPs Tanjong plc and MMC Corporation Bhd’s unit Malakoff Corp Bhd may be among the parties planning to purchase a significant stake in the company.
Tanjong is involved in power generation, gaming, leisure and property investment and is controlled by Malaysian billionaire T Ananda Krishnan, through various investment vehicles, including privately-held investment arm, Usaha Tegas Sdn Bhd.
Incidentally, Brahmal Vasudevan, a board member of Usaha Tegas, owns a 5.71% indirect and 0.74% direct stake in Mudajaya. Filings with Bursa Malaysia show him raising his stake in Mudajaya by a net amount of 100,000 shares in March and April this year.
Malakoff is one of the leading players in power generation, which was taken private by MMC in 2007 and has operations locally and overseas. MMC currently holds a 51% stake in Malakoff.
Tanjong yesterday rose 1.5% or 26 sen to RM17.90, with over 224,000 shares done while MMC rose five sen or 2.1% to RM2.46 with 3.5 million shares traded.
An analyst said Mudajaya’s “fundamentally cheap” valuation, based on price-to-earnings ratios (PER), may also be behind the speculation on the potential entry of a new substantial shareholder. According to consensus forecasts, Mudajaya’s estimated price-to-earnings ratio (PER) is just under 11 times for 2010.
“Furthermore, the IPPs may seek synergies from Mudajaya, with a common ground in the power sector. They could also diversify into construction, trading and quarries,” said the analyst.
Mudajaya was incorporated in 2003 and listed in 2004. It has interests in construction, property development, manufacturing, trading and power. In 2009, the company signed a RM2.64 billion contract to set up an IPP project in India. It is in the midst of building a coal-fired power plant, also in India.
When contacted, company officials at Mulpha Infrastructure’s parent company Mulpha International Bhd told The Edge Financial Daily that they had no knowledge of its block of shares being up for sale.
Mudajaya company officials also told The Edge Financial Daily that they were not aware of any potential sale of any block of shares in the company and were not privy to offers or proposals that may be made by other shareholders.
Aside from the interest from local funds, Mudajaya has also attracted some foreign investor attention.
“Investor roadshows have been taking place. We met about 20 potential investors. They are mostly funds and institutional investors from the US, Singapore and Hong Kong,” another Mudajaya official told The Edge Financial Daily.
Since the start of the year, five research houses have released reports on Mudajaya. Four have issued buy calls while one had it as unrated. The average target share price for the these analysts was RM7.02.
According to consensus forecasts, Mudajaya is trading at a prospective 2010 PER of 10.9 times. Other medium-to-large players in the construction industry, such as WCT Bhd, IJM Corp Bhd and Gamuda Bhd are trading on prospective PER of 14.7 times, 17.3 times and 23.2 times, respectively.
This article appeared in The Edge Financial Daily, July 22, 2010.
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