$CRESBLD / 8591 (CREST BUILDER HOLDINGS BERHAD) , a potential turnaround company in the making?

Crest Builder is founded in 1983 by the late Mr. Yong Soon Chow, which is the father of current managing director, Eric Yong Shang Ming. They’re holding Crest Builder Bhd through their private family vehicle, SC Yong Holdings Sdn Bhd, totalling about 43.23%.

Crest Builder in total has four (4) business segment, which are:-
i) Their bread & butter – Construction, specifically in highrise construction
ii) Concession Arrangement – UiTM Tapah maintenance works contract
iii) Property Development – Interpoint @ Bandar Bukit Tinggi 2, The Latitud8, on top of Dang Wangi LRT station, Kelana Jaya LRT Station Land Redevelopment (Currently on-hold)
iv) Investment holding – Office building & Car park management (rental service)
- Tierra Crest, PJ (85% block rented to UNITAR, from official website)
- The Crest, 3 Two Square, PJ (Cresbld’s HQ & collecting car park rental from employees working within the office building)
- Avenue Crest (Retail lots & car parks rental)

Crest Builder’s financial performance has been rather sluggish in the last 4 years, being affected by the weak market sentiment in property development market, having forced to postpone its pioneer TOD development project. In addition, it is also hit by pandemic, which affected its overall business performance. Share price wise, it has tumbled all the way down to RM 0.40 – RM 0.50 range from peak RM 1.10 at year 2017 & year 2019, indicating a market capitalization of RM 70 – 90 million.

At current juncture, Crest Builder has about RM 1.9 billion of construction order book that would keep it busy until year 2027. Its property development in Interpoint @ Bandar Bukit Tinggi 2 seems to be receiving good response from Klang’s residents, it is currently about 71% sold.

Other than that, it is already commencing the construction works of The Latitud8, Dang Wangi, which the land owner is Prasarana & they are entitled to receive 21.2% of total GDV by the way of combination of cash payment & payment in kind (completed units). They have won the land redevelopment right back then in 2012, under Intan Sekitar Sdn Bhd (51% owned by Crest Builder). The development is expected to completed in December 2027. I remain hopeful to the project to be successfully delivered as the project has been dragged for more than 10 years & market sentiment on TOD seems to be on the positive side.

The balance sheet of Crest Builder at a first glance does seem worrying, having total loans & borrowings of RM 550 million (short term – RM 216 million & long term – RM 334 million), a net gearing ratio of 1.9x.

In fact, a bulk of the loans & borrowings (RM 290 million) is under Sukuk Murabahah to finance the UITM Tapah project that is generating revenue of RM 40 million, contributing PAT of RM 6.3 million based on FY2023. Taking out this bulk of borrowings, the gearing ratio does not actually seem that bad.

Crest Builder currently is trading at RM 0.68, which implies a market capitalization of RM 120 million. With the record high construction order book, smooth-sailing property development, profitable concession arrangement & property investment backing on Crest Builder, I believe the financial turnaround is possible & share price will move back to its peak.