PETALING JAYA: Gadang Holdings Bhd
’s construction of a data centre (DC) will be earnings positive for the construction company from its financial year 2025 (FY25) onwards.
TA Research stated the RM280mil two-year contract to design and develop the Klang Valley data centre block two in Cyberjaya, Selangor, secured by Gadang’s wholly-owned subsidiary, Gadang Engineering (M) Sdn Bhd from TM Technology Services Sdn Bhd, was the group’s first new and such type of construction job in FY24.
It had increased Gadang’s total outstanding order book to RM1.3bil and is equivalent to 5.1 times its FY23 construction division revenue (year ending May 31).
“We expect substantial earnings contributions to kick in from FY25 onward. Consequently, we have revised our progress billing, coupled with an upward adjustment of our FY24 order book replenishment assumption to RM350mil from the previous RM150mil.
“As a result, our FY25 and FY26’s earnings forecasts are revised upward by 20.1% and 52.8% respectively,” the research house stated in a recent report on Gadang.
Work on the DC, scheduled to commence last month, is slated for completion within 24 months.
TA Research has estimated a pre-tax margin of 5.5% on the project which is expected to contribute net earnings of about RM11.7mil to Gadang.
The research house had upgraded the stock to a “hold” with a target price of 42 sen a share (from 22 sen) after adjusting its target price earnings multiple to 15 times from 10 times against the construction division’s calendar year 2025 earnings.
This was done after considering Gadang as a strong candidate for upcoming large scale infrastructure projects such as the Penang light rail transit and mass rail transit three projects.
