KUALA LUMPUR: JF Apex Securities Research has mantained its “Buy” call on Gadang Holdings Bhds on news that its wholly-owned subsididiary Gadang Engineering (M) sdn Bhd has accepted the Letter of Acceptance from Cyberview Sdn Bhd to undertake the proposed development of Cyberjaya Hospital.
The health facility in Cyberjaya, which will house 288 beds, is valued at RM475 mil and will bring Gadang's construction order book to RM1.97 bil. According to JP Apex Research, the outstanding order book will sustain the Group's revenue visibility for close to 3.6 years or 3.6 times its FY17 revenue.
In its research report released on Monday, JF Apex Research notes it expects the project to take three years to complete although details are still forthcoming.
“Assuming a net profit margin of 7%, this project could contribute about c.RM32.9 mil to its bottom line, spanning over three years.”
“Revise upwards our target order book replenishment of RM400m for FY18 to RM750m as the project clinched exceeded our target order book replenishment by 18.7%.”
JF Apex Research reports no change with its earnings forecast for FY18 despite an upward revision of Gadang's target order book as it smoothens the work-in-progress recognition. However, the research house tweaks its earnings forecast for FY19 by 8% with a y-o-y growth of 17%.
Along with its “Buy” call on Gadang, JF Apex Research is maintaining its target price of RM1.50, deriving the valuation by pegging at 13x FY18F PER.
Looking towards the future, JP Apex is “sanguine” on Gadang's earning, which will be underpinned by property unbilled sales of RM136.2 mil on top of the RM1.97 bil construction order book.
“We are cautiously optimistic with the group’s property development segment which focuses on affordable homes that suit the current market appetite as well as its expansion plans for power business which will boost its recurring income.”
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