Following the Coal Supply Agreement with South Eastern Coalfields Ltd (“SECL”) for the supply of coal for Phase I of the 4x360MW Coal-fired Thermal Power Plant at Chhattisgarh, India (1x360MW installed capacity of the power station), Mudajaya has finally secured the supply for Phase II, which are the remaining three units of the power plant (3x360MW). With the coal supply risk removed, the next milestone that we believe will catalyse the stock is the commissioning of unit 1 by end-2013.

The Coal Supply Agreement for Phase 2 was signed by Mudajaya‟s 26% owned associate, RKM Powergen Pvt Ltd (“RKMP”) with SECL which shall ensure coal supply for at least 20 years (can be extended upon mutual agreement by both parties) or of the life of the power plant. Total contracted amount p.a. is 4.55m MT(in addition to 1.69m MT for Phase 1) as per original Letter of Assurance (“LOA”) issued earlier by SECL at prevailing price of approximately USD25/MT. The mode of transport is by rail and type of coal is Grade F with Gross Calorific Value 3,300 - 3600Kcal/Kg, similar to Phase 1 deal.

Eyes on completion of unit one. With the coal supply secured, the next milestone to watch for is the completion of unit one, which is expected to be fired up by end-2013 and the remaining units by mid-2014. To recap, the Group has deferred the Commercial Operation Date from August to end-2013. Despite slower than expected job replenishment so far, the coal supply agreement in our view should comfort investors. Consistent with its corporate strategy, the Group has delivered in terms of growing its other business units such as the recent JV to develop a mixed development in Tropicana (GDV RM700m) and recurring income i.e. renewable energy business and the power plant in India.

Reiterate Outperform with TP of RM3.40, pegged to c.11x PER of FY14 EPS. We still like Mudajaya for its expertise in power plant construction i.e. beneficiary of power plant construction spending, strong balance sheet, and attractive valuations.

Source: PublicInvest Research - 3 Oct 2013