Nov 15 2013, 10:09 AM
Gadang to clock 32% CAGR in FY14-FY16:
http://www.thesundaily.my/news/881012
PETALING JAYA (Nov 14, 2013): Gadang Holdings Bhd's net profit is set to grow at a compound annual growth rate (CAGR) of 32% for the financial years ending May 31, 2014, 2015 and 2016 (FY14-FY16), sustained by the construction and property divisions, while extra earnings from its power generation and plantation businesses should contribute to the group over a longer term, said JF Apex Securities Bhd.
The research firm is also projecting a CAGR growth of 31% in Gadang's revenue over the next three financial years, underpinned by the group's outstanding construction order book of RM1.26 billion as of August as well as the total estimated undeveloped gross development value (GDV) of more than RM2.2 billion in its property division.
"The utility division is expected to contribute more significantly once the earnings from its power generation business starts rolling in, while the plantation division is projected to chip in RM20 million of revenue upon full maturity in four to five years," said JF Apex in a report yesterday.
It has initiated coverage on Gadang with a "buy" call at 94.5 sen and a target price of RM1.43.
JF Apex opines that the group deserves to be re-rated in view of its sizeable outstanding construction order book, with a total of RM425 million worth of property launches earmarked for FY14 and its intent to boost its utility division by increasing capacity in its existing water treatment business while diversifying into mini hydro power generation.
Other factors include Gadang's potential to win more projects under its construction division as it is currently bidding for projects worth RM6 billion in total, as well as the group's earnings growth at a three-year-CAGR of 32% during FY14-FY16, said JF Apex.
"The group is aiming for new sales of RM300 million in FY14, spearheaded by Phase 2 of the Jentayu Residensi in Tampoi, Johor which has a GDV of RM369 million and Phase 2 of Residensi Vyne in Sungai Besi, Kuala Lumpur with a GDV of RM213 million.
"Elsewhere in the north, Gadang is launching Phase 1 of its Pokok Sena township in Kedah which has a GDV of RM108 million by the end of 2013," said JF Apex.
"Overall, we view the property division as the pillar supporting the earnings growth of the group, judging by the remaining GDV to be developed, which amounted to more than RM2.2 billion," it added.
JF Apex also pointed out that Gadang is joining the 1Malaysia People's Housing Scheme (PR1MA), as it teams up with Cyberview Sdn Bhd to co-develop the K-Workers Housing Project in Cyberjaya, Selangor, which is part of the initiative by the government to provide affordable houses.
Phase 1 of the project with a GDV of RM148 million, is expected to be launched by mid-2014, consisting of 144 terrace houses and 325 PR1MA apartment units.
"We expect a good take-up rate from this project while the sizeable 109 acres site would provide an estimated GDV of RM1.06 billion in total for the group over the next seven to eight years, thus sustaining the earnings growth in its property division," the company said.
The group's revenue in FY13 is derived from four business segments, namely construction, property, utility, and plantation.
Gadang's cash piles ballooned to RM83 million in FY13 from RM29.7 million in FY12, mainly due to the variation order arising from the KLIA2 project.
"The group's net gearing as of FY13 is close to zero, thus providing it ample room to gear up for further land bank acquisition as well as supporting its venture into the power generation business," it added.
"The group is also contemplating distributing dividends on a regular basis by adopting a stated dividend policy to reward long-term investors should the cash flow continues to be stable," it said.
Investment CYBERJAYA - Next Phase of Growth, Rebooting CYBERJAYA
Quote
0.0896sec
0.65
8 queries
GZIP Disabled