JF Apex: Positive on Gadang’s future earnings

KUALA LUMPUR: JF Apex is positive on Gadang’s future earnings given its recent order book replenishment of RM560mil from RAPID projects as well as sales activities generated by its flagship property projects.

It maintains its Buy call on Gadang with unchanged target price of RM2.59, pegged to a PER of 8.4x of diluted financial year ending May 31, 2016 EPS of 31 sen.

“We continue to favour the group for its well-diversified business model as well as its ability to achieve growth across all divisions,” the research house said on Friday. 

Gadang’s recent nine-month results were above JF Apex’s expectations, with revenue and net profit matching 59% and 79% of its topline and bottomline forecast for 2016 respectively.

Gadang recorded a  RM175.9mil in revenue and RM25.1mil in net profit for 3Q16. The improved performance was mainly attributed to higher work-in progress for both construction and property segments. 

For the nine-month period, it recorded RM427.3min in revenue and RM63.6mil in net profit due to higher margin from its construction and property projects.

To-date, the outstanding order book of RM889.5mil will enable the group to sustain its revenue visibility over 1.5 year or 1.5 times of 2015 revenue. The Group recently tendered over RM10bil worth of jobs, namely RAPID, KVMRT2, DASH and SUKE. 

“We believe the group stays high chance to further replenish its order book given its experience in both KVMRT1 and RAPID jobs,” the research house said.

For the property segment, JF Apex remains neutral given the lacklustre macro outlook for the industry. Looking forward, the property segment is underpinned by its unbilled sales of RM243.5mil as of Feb 29, 2016 with revenue visibility over 2 times of 2015 revenue property segment.
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