Gadang’s earnings to remain buoyant going into FY17
KUCHING: Gadang Holdings Bhd (Gadang) is poised to sustain its earnings in financial year 2017 (FY17) ending May 2017 following a strong showing in FY16 ended May 2016.
The construction cum property developer which registered 58 per cent rise in net profit and 15 per cent increase in revenue for FY16 has been tipped by analysts to continue maintaining its strong financial performance in FY17.
They observed that Gadang financial performance for FY16 has beaten their expectations and believed that Gadang’s financial performance in FY17 will be supported by its robust outstanding construction order book and strong unbilled property sales.
RHB Research Institute Sdn Bhd (RHB Research) in a report yesterday said it continues to opine that Gadang’s earnings outlook will remain strong over the next two years.
The research firm outlined that the company’s forward earnings will be supported by the outstanding construction orderbook, which stood at approximately RM739.5 million as at April 2016.
Similarly, the research arm of TA Securities Holdings Bhd ( TA Research) in another report said Gadang’s outstanding construction order book is estimated at RM710 million, which translated into 1.5 times construction earnings in FY16.
The research firm gathered that the group is eyeing construction projects such as works packages for Mass Rapid Transit Line 2 MRT2, Damansara- Shah Alam Highway ( DASH), Sungai BesiUlu Kelang Elevated Expressway (SUKE), Light Rail Transit Line 3 (LRT3) and civil works at the Refinery and Petrochemical Integrated Development ( RAPID) project in Pengerang, Johor to replenish its construction order book.
Additionally, RHB Research believed Gadang’s property business’ earnings outlook over the next 12-18 months remains intact despite the weak property market conditions.
It noted that the company’s property division earnings will be underpinned by its unbilled property sales of about RM233.7 million as at May 2016.
Besides, the research firm was positive on the company’s focus on the affordable housing segment.
Apart from that, TA Research and the research arm of JF Apex Securities Bhd (JF Apex Research) expects Gadang’s earnings from the property segment to remain strong supported by strong unbilled sales with revenue visibility over 1.35 times of FY16 revenue in property segment.
They were positive on Gadang’s earnings given the favorable unbilled sales coupled with sizeable order book from the construction division as well as opportunity to increase the company’s order book from RAPID and MRT2 projects later this year.
Meanwhile, Gadang told Bursa Malaysia last Thursday that the company’s earnings for the fourth quarter of financial year 2016 (4QFY16) increased by 20 per cent year-on-year (y-o-y) to RM30.5 million from RM25.40 million in 4QFY15.