Date: 07/04/2014
Source : CIMB
Target RM3.19 (Stock Rating: ADD)
There were no major surprises in the Edge Weekly article about Kidex. Nonetheless, we view the article positively as it indicates that the projects may be awarded soon. The article stated that Mudajaya is one of the two listed frontrunners, which is within our expectations. We continue to believe that the group has the best chance of securing the project, given its strong domestic highway track record, especially for elevated structures. This project would more than double its current order book. The decision on Kidex could be made in 2H. This project and the group's power plant theme are potential catalysts in 2014. We maintain our Add rating and target price, still pegged to a 40% discount to RNAV discount.
What Happened
Frontrunner for Kidex. The Edge Weekly reported that the RM2bn job to build the 14.9km Kinrara-Damansara Expressway (Kidex) is now a two-horse race between Mudajaya and Bina Puri Holdings, according to sources. The two bids are the most likely winners among the five shortlisted. Bina Puri partners China Harbour Engineering Co Ltd but Mudajaya has put in a standalone bid.
What We Think
Mudajaya has solid track record in highway construction. This news is positive, albeit unsurprising, as it indicates that the Kidex award could materialise soon. We have highlighted in our previous notes that the group is one of the two listed contractors bidding for the job. We still believe that Mudajaya has the best chance of securing the projects due to its good track record in building highways in the Klang Valley, especially elevated ones. The group's last highway project was the RM2bn-3bn KL-Kuala Selangor Expressway (Latar Highway). Kidex is a fully elevated expressway that will be higher than the average elevated highway in the Klang Valley as it will pass through major residential areas. Our sources indicated that Kidex is likely to be awarded in 2H14 as construction is scheduled to start by next year.
What You Should Do
Catalysts in the medium term. Kidex is the next highway in the government's pipeline after the RM5bn-6bn West Coast Expressway (WCE). This news supports our view that private sector-driven projects will accelerate in 2014. Securing Kidex would more than double Mudajaya's order book from RM1bn to RM3bn. Kidex is an added boost to the potential power plant awards worth an estimated RM400m-5oom for Track 3A and c.RM1bn for track 3B.
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