Gadang procures largest contract amounting to RM952 million

KUCHING: Gadang Holdings Bhd (Gadang) has won the largest ever construction contract since the company’s establishment worth approximately RM952 million recently.

The research arm of TA Securities Holdings Bhd (TA Research) in a report yesterday said it gathered that the company’s latest contract for a work package of the Mass Rapid Transit Line 2 (MRT2) for a sum of of RM952.1 million was the largest construction project ever secured by Gadang.

To note, Gadang told Bursa Malaysia on March 10 that the company’s wholly- owned subsidiary Gadang Engineering (M) Sdn Bhd has received a letter of acceptance from Mass Rapid Transit Corporation Sdn Bhd (MRT Corp).

The company added the letter of acceptance was on the award of the works package V206 of MRT2.

Gadang revealed that the work package involves the construction and completion of viaduct guide way and other associated works from Serdang Raya to Universiti Putra Malaysia (UPM).

TA Research opined that the long-awaited new construction contract would definitely eliminate a major concern among investors on Gadang’s depleting outstanding order book.

It has been 15 months since Gadang secured the previous construction contract in the middle of December 2015, it added.

With the latest job win, Gadang’s outstanding order book is expected to surge to RM1.4 billion, translating into 2.9 times financial year 2016 (FY16) ended May 2016 construction revenue.

The research firm projected that the amount could provide earnings visibility to Gadang’s construction division for the next four years.

TA Research expects the MRT2 project to generate a net profit of RM56.4 million or 8.7sen per share throughout the construction period assuming an operating profit margin of eight per cent.

The research firm opined that the MRT work package secured by Gadang has far exceeded its order book replenishment assumption of RM500 million for FY17 ending May 2017.