Tanjong plc and Mudajaya Group Bhd could potentially form a joint venture with an Indian partner to bid for India’s ultra mega power plants (UMPPs), said OSK Research.
The research house said India would be calling for pre-qualification tenders for five UMPPs very soon, with each having a capacity of 4,000 megawatts (MW) and the engineering and procurement contract would be worth between US$4 billion (RM12.88 billion) and US$4.8 billion.
“We do not discount the possibility of Tanjong and Mudajaya forming a JV along with a local Indian partner to bid for the UMPPs,” OSK said in a report yesterday.
The research house was commenting on a report by The Edge Financial Daily of Tanjong being speculated to be among independent power producers (IPPs) which could be eyeing a significant stake in Mudajaya, including that held by Mulpha International Bhd.
“Although Mulpha denied in the news article that its block of Mudajaya shares was up for sale, we understand that the company has been in talks with various parties on the matter.
“In fact, we gather that Mulpha has actually held talks with Tanjong on the potential sale of its 21.4% stake in Mudajaya.
“Despite having board representation in Mudajaya, we understand that Mulpha has been a somewhat silent shareholder in the former,” OSK Research said.
It said Tanjong currently did not have any IPP exposure in India and had previously expressed interest to enter the market.
“Acquiring a stake in Mudajaya would give it exposure in that country as Mudajaya holds a 26% stake in RKM, which is tasked with undertaking a 4x360MW IPP project in Chhattisgarh, India,” OSK said.
Tanjong, which is involved in power generation, gaming, leisure and property investment, is controlled by billionaire T Ananda Krishnan, through various vehicles, including his privately-held investment arm, Usaha Tegas Sdn Bhd.
The Edge Financial Daily had also reported that incidentally, Brahmal Vasudevan, a board member of Usaha Tegas, owns a 5.71% direct and a 0.74% indirect stake in Mudajaya.
On another speculated potential buyer of a significant stake in Mudajaya, OSK said it was unlikely to be Malakoff Corp Bhd, the country’s largest IPP and which is 51%-owned by MMC Corporation Bhd.
“Malakoff is highly geared and is likely to concentrate on its proposed Tanjung Bin power plant expansion instead,” it said.
Maintaining a buy on Mudajaya with a target price of RM7.33, OSK said Mudajaya’s management had guided that second-quarter (2Q) earnings could come in at RM60 million to RM65 million versus RM50.6 million in the preceding quarter. Mudajaya is set to release its 2Q results next
month.
The research house said Mudajaya remained its top sector pick given its strong earnings growth with a three-year forecast compound annual growth rate of 37%, sizeable orderbook balance of RM5.2 billion, above-industry profit margins, superior forward return on equity of 30%-40%, net cash position, and lucrative recurring income over the medium term.
OSK also has a buy on Tanjong, with a target price of RM18.60, and a trading buy on MMC, with a target price of RM2.54.
Mudajaya yesterday rose to an intra-day high of RM6.10 before closing at RM5.94, up 23 sen or 4%, while Mulpha added three sen to 47 sen.
Tanjong closed six sen lower at RM17.84, while MMC fell one sen to RM2.45.
This article appeared in The Edge Financial Daily, July 23, 2010.
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