Monday, December 7, 2009

SAAG (RM0.175) secures US$120m Bangladesh power projects

KUALA LUMPUR: SAAG CONSOLIDATED (M) BHD has secured two projects to build power stations in Bangladesh with a total contract value of US$120 million. SAAG said on Friday, Dec 4 it had accepted a letter of award from Garisan Etika Bangladesh (Pvt.) Ltd to be the engineering, procurement and construction contractor for the power plants at the Adamjee Export Processing Zone, Bangladesh. The projects involved six 6MW power plants and two 34MW combined cycle plants to be built at the zone. SAAG said the agreed execution period was 15 months from commencement of the project works. The Project Sum shall be paid progressively over the project period. The project will be funded through bank borrowings, internally generated funds and/or corporate exercises.

Source: The Edge

Should have some run-up in share price as investors have been waiting for the announcement of this project award following SAAG's increase in inventories to RM332.7mil @ Sept 2009 from RM1.2mil @ Dec 2008 to procure turbo machinery/rig equipments funded by short term borrowings. Failure to secure this award could bring dire consequences to the company. Anyway, I think this one is somewhat similar to EPCC projects handled by Mudajaya. Should command higher margins I suppose. By simple calculation, US$120mil (RM408mil) over 15 months and net margin of 10%, net profit from this award could be RM32.6mil p.a. or EPS of 2.8 sen. If net margin of 5%, EPS will be 1.4 sen. Just by attaching a PER of 5x to earnings from this project should add at least 7 to 14 sen to its share price already. Worth a bet since its share price has been beaten down from 40 sen since May to a pathetic 17.5 sen currently.

Share Capital: 1,174.7mil
Mkt Cap: RM205.6mil

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