Mudajaya’s Indonesian acquisition not exciting, says Alliance

by **Cals** Tue 06 May 2014, 17:20

Business & Markets 2014

Written by Ahmad Naqib Idris Adzman Shah of theedgemalaysia.com

Tuesday, 06 May 2014 10:51

KUALA LUMPUR (May 6): Alliance Research Sdn Bhd said that Mudajaya’s acquisition of a stake in an Indonesian power producer, PT Harmoni Energy, will not bring much excitement due to its relatively small size.

Mudajaya announced yesterday that its wholly-owned subsidiary, Mudajaya Bhd had entered into a memorandum of understanding (MOU) with PT Indomuda Satria Internusa to acquire its 70% stake in PT Harmoni Energy Indonesia for RM18.5 million (US$5.8 million).

Harmoni is currently constructing a 2x7MW coal fired plant on a build-operate-transfer in Desa Baruta Analalaki, Sulawesi, Indonesia.

The company had entered into a power purchase agreement (PPA) for the plant on July 13, 2011, where the tariff rates for years 1 to 8 is USD0.118487/kwh (RM0.385083/kwh) and for years 9 to 25 is USD0.09384/kwh (RM0.30498/kwh).

“This proposed acquisition is relatively small for Mudajaya and can be easily satisfied via its RM67.5 million cash balance,” wrote Alliance in a note today.

It added that the group’s RM1 billion sukuk programme will also be able to aid in the financing of the acquisition.

“Given the relatively small size of the proposed acquisition, we leave our earnings estimates unchanged for now,” said the research house.

However, it said there could be downside risk to its forecasts for Mudajaya due to further delays in the commencement of Chhatisgarh IPP.

“Our forecast assumes contribution by mid-2014 but management has guided that this could be further delayed until year-end. We will review our earnings accordingly,” Alliance said.

Alliance maintained “buy” on Mudajaya Group Bhd at RM2.64, with an unchanged target price (TP) of RM3.62.