Gadang Q3 2018

Gadang released their third quarter result  where recorded revenue of RM152.68 million as compared to RM128.05 million in the corresponding quarter of the preceding year. The Group’s profit before tax decreased to RM35.81 million as compared to RM37.05 million in the corresponding quarter of the preceding year.

For the current year to date, revenue increased 9% to RM412.29 million. Profit before tax increased by 4%
to RM99.26 million. The increase in profit before tax was mainly due to higher construction progress from
ongoing projects. Total expenses for the current year to date increased by RM17.90 million as compared to the preceding year to date. This was mainly due to:

 administrative expenses increased by RM5.01 million mainly due to employees share options recognised
during the current quarter;
 operating expenses increased by RM7.26 million mainly due to higher selling and marketing cost; and
 other expenses increased by RM4.18 million mainly due to the loss on foreign exchange and loss on
disposal of Plantation Division.

BUSINESS PROSPECTS
The Board expects the current year performance to be weaker due to the sluggish market condition of the
property sector. The construction division’s ability to contain the higher operating cost is critical to its
overall profitability for the existing technically more complex infrastructure projects.
Broadly, the Group’s initiatives adopted to sustain the year results are as follows:-

(a) Construction Division
The Division is cautiously tendering for larger Government’s infrastructure and building projects and has to-date achieved an outstanding order book value of some RM1.59 billion which consist of RAPID package 301 and 402, KVMRT V206, TRX and Cyberjaya Hospital.

(b) Property Division
The Division has a total land bank size (including joint venture projects) of 442.20 acres with a total estimated gross development value (GDV) of RM3.89 billion. The Division will remain focused on affordable homes in line with the present market demand. The unbilled sales as at to date stand at RM134 million. The on-going projects are:

 Laman View mixed development in Cyberjaya;
 The Vyne residential development in Salak South;
 Bandar Puncak Sena township development in Kedah; and
 Capital City integrated complex development in Johor Bahru.

(c) Utility Division
The recurring income from the 4 operating water treatment plants are expected to remain stable.
The mini hydro project of 9MW in Indonesia is expected to be income generating by the second
quarter of the financial year 2019. The Ringgit-Indonesian Rupiah exchange rate has strengthened considerably in the recent months, hence resulted in substantial loss on foreign exchange translation.

Fundamental:
Total Asset RM1538mil
Inventories increased to RM69mil *This might be due to weaker market from property sector
Cash RM197mil
Total Liabilities RM852mil
Total Borrowings increased to RM284mil
Total Equity RM685mil

Technical:

Based on the price chart, RM0.80 is a solid support, RSI ovesold, seems the price has reached bottom and started to pick up slowly. Anyhow, construction sectors still in bearish mode.

Conclusion:

Solid earning from the group especially on construction side. Currently the share price RM0.815 trading  at P/E ratio 5.3 only, with NTA of RM1.03, this stock is undervalued.

Disclaimer: The information in this article has been compiled from sources believed to be reliable. Its accuracy and/ or completeness is not guaranteed and opinions are subject to change without notice. This article is for information sharing only, author accept no liability for any direct or indirect loss arising from the use of this article.
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