Gadang Q4/FY2018

Last month Gadang released their Q4 2018 result, the result is within my expectation. For the current year to date, revenue increased to RM594.30 million as compared to RM553.87 million in the preceding year to date. This was mainly due to higher construction progress from ongoing projects.

However, profit before tax declined by 6% to RM132.56 million. Total expenses for the current year to date increased by RM23.95 million as compared to the preceding year to date. This was mainly attributed by the following accounting charges:

  • fair value adjustment pursuant to the granting of the Employees’ Share Option Scheme of some RM4.38
    million; and
  • one-off impairment costs amounting to some RM10.49 million in relation to investment properties,
    inventories and other receivables.

OPERATING SEGMENTS REVIEW

  1. Construction Division
    For current quarter, revenue increased marginally to RM104.56 million as compared to RM100.66 million
    recorded in the corresponding quarter of the preceding year. Profit before tax for the current quarter
    decreased to RM16.76 million as compared to RM36.05 million in the corresponding quarter of the
    preceding year.
    Revenue for the current year to date increased by 31% to RM376.37 million as compared to RM286.62
    million recorded in the preceding year to date. Profit before tax increased by 3% to RM85.13 million.
    This overall improvement in performance was mainly due to:
     Progress arising from existing project namely, RAPID package 301 and 402;
     Work progress for new projects namely, KVMRT V206 project, TRX project and Cyberjaya Hospital
    project; and
     Subsequent income recognition of variation orders upon finalisation of completed projects.

2. Property Division
Revenue for the current quarter increased to RM71.71 million as compared to RM68.15 million in the
corresponding quarter of the preceding year. Profit before tax increased to RM26.88 million as compared to RM13.29 million in the corresponding quarter of the preceding year. As the entire property market experienced weak demand, revenue for the current year to date declined from RM244.18 million to RM195.11 million. However, profit before tax increased by 4% to RM65.48 million due to higher profit margin, mainly attributed to higher profit reported for the Capital City project.

3. Utility Division
Revenue for the current year to date decreased to RM22.81 million from RM23.07 million in the preceding
year. The Division recorded loss of RM0.41 million for the current year to date as compared to profit before
tax of RM4.65 million in the preceding year. The operating loss was mainly due to unrealised loss on foreign exchange of RM3.86 million, pre-operating expenses for the mini-hydro power project of RM0.91 million and fair value adjustment pursuant to the granting of the Employees’ Share Option Scheme of RM0.24 million taken up at Utility Division level.

BUSINESS PROSPECTS
1. Construction Division
Based on the on-going infrastructure projects under construction, a stable earnings stream is expected for the financial year ending 31 May 2019. In addition, the division’s outstanding order book of some RM1.51
billion, shall provide good income viability for the Construction Division.

2. Property Division
The overall weakness in the property market has impacted sales and therefore more aggressive marketing
programmes will be initiated. With unbilled sales of some RM100.80 million, and planned new launches,
the Property Division is expected to maintain a satisfactory performance in the coming financial year.

3. Utility Division
Whilst the water concessions will continue to provide recurrent income, the successful implementation of
the mini-hydro power plant by early 2019 will add a fresh recurring income stream to the Group.

Fundamental

Market Capital (RM): 489.67m
Number of Share: 661.72m
EPS (cent): 14.38 *trailing twelve months
P/E Ratio: 5.15
ROE (%): 13.57
Dividend (cent): 3.000
Dividend Yield (%): 4.05
NTA (RM): 1.060
PTBV: 0.70
Total cash & equivalents: RM199.402 million
Total borrowing: RM283.41 million

 an investment property in Damansara Perdana of RM45 million;
 construction of concession assets in Indonesia of RM18 million;
 capital expenditure for Construction Division; and
 property development expenditure for Property Division.

Technical

As we can see from above chart, it has moved out from descending tunnel and trading side way. Immediate resistance is RM0.78 whereby support is RM0.64.

Opportunity

  • Construction order book: RM1.51 billion (keep company busy for 3+years).
  • Property unbilled sales: RM100.8 million &  Capital City entitlement to be recognized.
  • Utility mini-hydro power plant by early 2019 will add a fresh recurring income stream to the Group.
  • Open tender by new PH government.
  • Construction services and building material costs will not be charged under the Sales and Service Tax (SST), which will reduce the construction & properties cost.
  • Coming 3 cents dividend which will be announced on Sep 2018 according to previous years history.

Risk

  • Foreign exchange rate MYR vs IDR
  • Major construction which might be postponed or terminate by government *So far does not affect Gadang current projects

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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