Gadang adopts cautious outlook for this year

A file picture shows Kok (right) looking at a model of the company’s mixed development project called Capital City in Johor Baru. The project is expected to be fully completed in five years.

Gadang Holdings Bhd, which is mainly involved in construction and property, is cautious on the economic outlook for this year and is conservative when it comes to expecting new jobs.

“This year should be tough for the economy and we choose to be conservative and have not yet identified any jobs that we think we can add to our order book or even tender for,” managing director and chief executive officer Tan Sri Kok Onn tells StarBizWeek.

He says this after being asked whether the firm, which is involved in works for the Klang Valley MRT projects, plans to tender for jobs under Penang’s light rail transit (LRT) system project which reportedly will be back on the cards soon after being put on the back burner for over a decade.

“We are definitely cautious on the economy this year given the current oil price slide and the overall impact of rising costs on Malaysians,” he says.

Increasing competition among contractors have also pushed profit margins for certain jobs to razor-thin figures, making it pointless for mid-sized firms like Gadang to pursue them.

“We are comfortable as it is for now and will fully focus on our jobs at the Refinery and Petrochemical Integrated Development (Rapid) in Pengerang, Johor,”

Gadang currently has over RM1bil in construction jobs, comprising mainly Rapid jobs, and those jobs are expected to provide it with earnings visibility for the next two to three years.

So far, the company has tendered for “a few billion ringgit worth of projects”, Kok says.

“As for our property segment, everything is going as planned.”

At the beginning of 2014, StarBizWeek picked Gadang as one of its top 10 stock for the year.

In the first six months, the stock price had doubled from RM1.01 in January to an all-time high of RM2.01 in July, boosted by it obtaining Rapid jobs and its improving earnings.

Thereafter, profit-taking as well as overall market weakness had pushed the stock down to RM1.35 yesterday.

For its financial year ended May 31 (FY14), Gadang reported a net profit of RM43.9mil on revenue of RM540.7mil against a net profit of RM20.5mil on revenue of RM356.5mil in FY13.

Under its property segment, Gadang is developing a RM1.8bil Capital City planned mixed development project in Johor Baru which is expected to be fully completed in five years.

It also has an utility division involved in the Indonesian water supply sector and has acquired two small hydropower projects in Indonesia to supplement its recurring income.

Gadang also has a plantation segment where early harvesting had started in 2012 and RM20mil of yearly revenue from this business upon maturity, which is about four to five years from now, is expected.