PETALING JAYA: Gadang Holdings Bhd’s weaker-than-expected first quarter results, coupled with a challenging outlook, have prompted TA Securities to trim its earnings forecasts for the construction and property development company.
The research house also downgraded its construction progress and margin assumptions for the various projects under Gadang.
In its latest report, TA Securities cut forecasts for Gadang’s earnings for the financial years ending May 31,2021 (FY21) to FY23 by 22.5%, 8.8% and 4.8%, respectively.
“The outlook is expected to remain challenging due to the lack of new mega infrastructure projects since the 14th General Election.
“The outstanding construction order book is estimated at RM800mil.
“This translates into 1.6 times FY20 construction years and is expected to provide earnings visibility to the group for the next two years.
“With a challenging outlook, we trim FY21 order book replenishment assumption from RM500mil to RM400mil, ” said TA Securities.
Gadang registered a core net profit of RM1.9mil for the first quarter of FY21, which came in below analysts’ expectations, accounting for 4.8% of consensus’ full-year estimates.
This was mainly due to lower-than-expected contribution from the construction division, both in terms of revenue and margin. On a year-on-year basis, Gadang’s revenue for the first quarter declined by 21.8% to RM115.4mil while pre-tax profit declined at a faster pace of 97.9% to RM300,000, mainly due to lower margin for ongoing projects.
On the other hand, Gadang’s property division overtook the construction division to be the largest earnings contributor during the quarter, recording a pre-tax profit of RM4.2mil, a drop of 23% compared to a year ago, as property revenue during the quarter fell by 22.1% year-on-year to RM26mil.
“For its property division, Gadang has scheduled four property launches until the first quarter of 2021. These have a combined gross development value (GDV) of RM469mil to replenish its depleting unbilled property sales.“They are a townhouse project in Semenyih; the second phase of a townhouse project in Taman Putra Perdana, Puchong; an affordable apartment project in Laman View, Cyberjaya; as well as Phase 1 of a 78-acre residential development in Gelang Patah, Johor, ” said TA Securities.
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