Jaks’ Vietnam project to boost chances of securing new power-related projects

KUCHING: Jaks Resources Bhd’s (Jaks) 2X600 megawatt ( MW) Vietnam power plant project could play a significant role in bolstering the group’s chances of securing new power-related projects in Vietnam, analysts observed.

According to Affin Hwang Investment Bank Bhd ( Affin Hwang), although management’s current focus in Vietnam is to get the power plant operational by 2020, Jaks is also interested in getting involved in other power-related projects (including renewable energy) in Vietnam.

However, Affin Hwang believed that any new projects will only materialise in 2019-2020, when the current power plant is near completion, as it would provide Jaks with better bargaining strength when bidding for new power projects.

“We believe that for management to take up any new projects, the return of them would have to be similar to the current one,”’ the research firm said.

Although management did not provide details on the potential partners for new projects, the research firm believed that it would need to have the ability to secure financing for those projects.

It added that Jaks would likely maintain an associate stake in any new ventures so as to minimise the need to raise new equity.

While the potential of new power projects in Vietnam remains attractive, Affin Hwang also believed that the near-term rerating catalyst for Jaks lies with the completion of the Pacific Star project, which has been a drag on earnings since early 2017.

“The project is now expected to be completed by end-2018.”

The research firm estimated that Jaks’ earnings for financial year 2017-2018 estimate FY17-18E would be five to 12 per cent higher if the losses from Pacific Star were excluded.

All in, Affin Hwang maintained its ‘buy’ call on the stock.

“We believe the risk for late delivery is now lower as we progress into 2018-2019,” it said.