Gadang Holdings Bhd

$GADANG / 9261 (GADANG HOLDINGS BHD)
Research by TA Securities

$GADANG / 9261 (GADANG HOLDINGS BHD)
Research by TA Securities

KUALA LUMPUR: Stocks to watch on Monday include WMG Holdings Bhd, Glostrext Bhd, Fajarbaru Builder Group Bhd, Gadang Holdings Bhd, Sunway Real Estate Investment Trust (Sunway REIT) and Pharmaniaga Bhd.

KUALA LUMPUR: Gadang Holdings Bhd’s wholly-owned subsidiary, Gadang Construction Sdn Bhd, has entered into a sale and purchase agreement with Opulent Abode Sdn Bhd to dispose of a piece of leasehold land in Sungai Buloh, Selangor for RM65 million.

© New Straits Times Press (M) Bhd

KUALA LUMPUR: Gadang Holdings Bhd’s wholly-owned subsidiary, Gadang Construction Sdn Bhd, has entered into a sale and purchase agreement with Opulent Abode Sdn Bhd to dispose of a piece of leasehold land in Sungai Buloh, Selangor for RM65 million.

$GADANG / 9261 (GADANG HOLDINGS BHD)

-Gadang has a robust orderbook of approximately MYR1.1 billion as of May 2024, offering an orderbook/revenue cover ratio of 4x based on FY24 construction revenue.
-The company is well-positioned to secure more public infrastructure projects, leveraging its past experience with government-related projects such as hospitals, railways, and highways.
-The group's tenderbook, worth MYR2-3 billion, primarily focuses on infrastructure, with an estimated success rate of 20-25%.

Valuation Methodology:

-Gadang's construction arm is valued by comparing it to larger construction peers like Gamuda, IJM Corp, Sunway Construction, and Gabungan AQRS. A 40% small-cap discount is applied to reflect Gadang's smaller market capitalization.
-The property segment is valued with a 65% discount to RNAV, while the utilities arm (including water supply, mini hydropower, and solar photovoltaic) is valued using a discounted cash flow (DCF) approach with an 11.5% WACC.

Key Risks:

Potential risks include slow job replenishment, unexpected fluctuations in building material prices, and sudden labor shortages.

$GADANG / 9261 (GADANG HOLDINGS BHD)
Research by RHB
Not Rated – TP RM0.58

“Not Short Of Job Opportunities"

MYR0.58 FV based on SOP valuation. We envisage Gadang to be in the sweet spot to secure more jobs (especially infrastructure) in light of the anticipated project roll outs by the Government. Future earnings will be anchored by its strong focus in government jobs, property projects in Selangor and Johor, and recurring income from its utilities arm. In light of these factors, we view its valuation as undemanding – trading at 15.6x FY25F P/E vs the Bursa Malaysia Construction Index’s forward P/E of c.19x.

Analyst:
Adam Bin Mohamed Rahim
adam.mohamed.rahim@rhbgroup.com

$GADANG / 9261 (GADANG HOLDINGS BHD)
Research by TA
SELL– TP RM0.37

" Encouraging Operating Statistics"

Following the earnings revision, we reduced our SOP-derived target price
to RM0.37 (from RM0.55), inclusive of ESG premium 3% based on our 4-
star rating. Downgrade the stock to Sell from Hold previously due to
negative risk-reward ratio.

Analyst:
Raymond Ng Ing Yeow
raymondng@ta.com.my

DEALINGS IN LISTED SECURITIES (CHAPTER 14 OF LISTING REQUIREMENTS) : Intention to Deal During Closed Period

DEALINGS IN LISTED SECURITIES (CHAPTER 14 OF LISTING REQUIREMENTS) : Dealings Outside Closed Period

DEALINGS IN LISTED SECURITIES (CHAPTER 14 OF LISTING REQUIREMENTS) : Dealings Outside Closed Period

DEALINGS IN LISTED SECURITIES (CHAPTER 14 OF LISTING REQUIREMENTS) : Dealings Outside Closed Period

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.

$GADANG / 9261 (GADANG HOLDINGS BHD)

TRANSACTIONS (CHAPTER 10 OF LISTING REQUIREMENTS) : NON RELATED PARTY TRANSACTIONSGADANG HOLDINGS BERHAD ("GADANG" OR THE "COMPANY") PROPOSED ACQUISITION OF 21.08 ACRES OF FREEHOLD LAND IDENTIFIED AS PLOT R3-1 IN KWASA DAMANSARA ("SUBJECT LAND") BY ELEGANCE SONATA SDN BHD, AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF GADANG, FROM KWASA DEVELOPMENT (3) SDN BHD FOR A PURCHASE PRICE OF RM114,780,600 ("PROPOSED ACQUISITION")

$GADANG / 9261 (GADANG HOLDINGS BHD)
Research by TA
Hold – Target Price RM0.42

“Secures Maiden Data Centre Project Worth RM280mn"

Considering GADANG as one of the strong candidates for upcoming large- scale infrastructure projects such as the Penang LRT and MRT3, alongside the potential expansion within the burgeoning DC sector, we adjust our target PER from 10x to 15x against the construction division's CY25 earnings. This revised valuation takes into account a 20% discount compared to SUNCON's target PER of 19x, acknowledging GADANG's smaller market capitalisation. Nevertheless, we believe that this valuation remains equitable, considering the promising earnings trajectory expected over the next two years. All in all, we raise our SOP-derived target price to RM0.42 (from RM0.22). Upgrade to Hold.

Analyst:
Raymond Ng Ing Yeow
raymondng@ta.com.my

Gadang Holdings Bhd’s wholly owned subsidiary, Gadang Engineering (M) Sdn Bhd, has secured a contract from TM Technology Services Sdn Bhd worth RM280mil.

KUALA LUMPUR: Gadang Holdings Bhd’s wholly-owned subsidiary, Gadang Engineering (M) Sdn Bhd (GESB) has secured a contract from TM Technology Services Sdn Bhd worth RM280mil.

OTHERSGADANG HOLDINGS BERHAD ("GADANG" OR "THE COMPANY")
- LETTER OF AWARD: CONTRACT FOR THE DESIGN AND DEVELOPMENT OF KLANG VALLEY DATA CENTRE, BLOCK 2, CYBERJAYA, SELANGOR DARUL EHSAN FOR TM TECHNOLOGY SERVICES SDN BHD ("TM")

$GADANG / 9261 (GADANG HOLDINGS BHD)

TRANSACTIONS (CHAPTER 10 OF LISTING REQUIREMENTS) : NON RELATED PARTY TRANSACTIONSGADANG HOLDINGS BERHAD ("GADANG" OR THE "COMPANY") PROPOSED ACQUISITION OF 21.08 ACRES OF FREEHOLD LAND IDENTIFIED AS PLOT R3-1 IN KWASA DAMANSARA ("SUBJECT LAND") BY ELEGANCE SONATA SDN BHD, AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF GADANG, FROM KWASA DEVELOPMENT (3) SDN BHD FOR A PURCHASE PRICE OF RM114,780,600 ("PROPOSED ACQUISITION")

$GADANG / 9261 (GADANG HOLDINGS BHD)
Research by TA
Sell - TP of MYR0.22

“A Disappointing 9MFY24 Results ”

Excluding an extraordinary gain of RM7.0mn, GADANG’s 9MFY24 core earnings of RM7.1mn (+11.6% YoY) came in below our expectations, accounting for only 42.3% of our full-year estimates. The negative variance was largely due to: (i) slower-than-expected work progress in the construction division, and (ii) higher-than-expected operating costs in both the construction and utilities divisions. Following the earnings revision, we lower our SOP-derived target price to RM0.22 (from RM0.23) after rolling forward our valuation base year to CY25 earnings. Maintain Sell.

Analyst(s):
Raymond Ng Ing Yeow
raymondng@ta.com.my

$GADANG / 9261 (GADANG HOLDINGS BHD)

Quarterly rpt on consolidated results for the financial period ended 29/02/2024

KUALA LUMPUR: Gadang Holdings Bhd said its plan to purchase a 8.53 hectare freehold land in Kwasa Damansara will take longer than expected with the Economic Planning Unit’s (EPU) approval for the deal still pending.

© New Straits Times Press (M) Bhd

TRANSACTIONS (CHAPTER 10 OF LISTING REQUIREMENTS) : NON RELATED PARTY TRANSACTIONSGADANG HOLDINGS BERHAD ("GADANG" OR THE "COMPANY") PROPOSED ACQUISITION OF 21.08 ACRES OF FREEHOLD LAND IDENTIFIED AS PLOT R3-1 IN KWASA DAMANSARA ("SUBJECT LAND") BY ELEGANCE SONATA SDN BHD, AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF GADANG, FROM KWASA DEVELOPMENT (3) SDN BHD FOR A PURCHASE PRICE OF RM114,780,600 ("PROPOSED ACQUISITION")

DEALINGS IN LISTED SECURITIES (CHAPTER 14 OF LISTING REQUIREMENTS) : Intention to Deal During Closed Period

$GADANG / 9261 (GADANG HOLDINGS BHD)
Research by TA Securities
Sell – Target Price RM0.23

“Higher Operating Costs Weighed”

Following the earnings revision, we lower our TP to RM0.23 (from RM0.28) based on the SOP valuation. Maintain Sell call due to the stretched valuation.

Analyst:
Raymond Ng Ing Yeow
raymondng@ta.com.my

Quarterly rpt on consolidated results for the financial period ended 30/11/2023

Change of Company Secretary - TAN SEOK CHUNG