MALAYSIA

INVESTMENT RESEARCH REPORT

JF APEX SECURITIES BERHAD
(47680-X)

S
Company Update 29 May 2020
Gadang Holdings Berhad BUY
Silver lining Maintained

Share Price RM0.465 What’s New

Target Price RM0.590  ECRL contracts secured. Gadang Holdings Ber had
(Gadang) has secured 2 contracts from China
Company Description Communications Construction (ECRL) Sdn Bhd in relation to
Gadang Holdings Berhad is an investment holding the East Coast Rail Link Project (ECRL).
company. The Company, through its subsidiaries,
provides earthwork, civil engineer ing, and  Contracts package totaling RM81m. The contracts
construction projects. Gadang also develops and awarded worth total amount of RM 81m. Job scopes consist
invests in properties and manufactures ready- of construction and completion of subgrade earthworks from
mixed concrete. chainage 231+500 to chainage 238+322 ("Section 5
Project"), RM24m and construction and completion of
subgrade, drainage wor ks and culvert work from chainage
Stock Data 410+293 to chainage 424+182 ("Section 6 Project"),
Bursa / Bloomberg code 9261 / GADG MK RM57m.
Board / Sector Main / Cons-Material
Syariah Compliant status Yes  The groundwor k to commence in the near ter m.
Issued shares (m) 728.06 “Section 5 Project” and “Section 6 Project” are expected to
Par Value (RM) N/A start on 28 May 2020 and 15 June 2020 respectively. Both
Market cap. (RMm) 338.55 projects will contribute to the Group’s for its FY21-FY23’s
52-week price Range RM0.23 – 0.94 bottom line.
Beta (against KLCI) 2.16
3-m Average Daily Volume 10.97m Comment
3-m Average Daily Value^ RM4.32m  Expecting to contribute modestly to group’s bottom
line from FY21 onwards. The contracts award will provide
Share Performance
2 – 3 years ear nings visibility to Gadang. Assuming
1m 3m 12m
Absolute (% ) operating margin of 6%, the Group is expected to book in
22.4 45.3 -43.6
Relative (% -pts) 15.2 -17.0 -37.6 RM3.7m net profit during the tenure. Meanwhile, the
outstanding or derbook will elevate to RM968m from
Major Shareholders % RM887m. The moderate orderbook replenishment indicates
MELORIA Sdn Bhd 13.61 a good sign to have more future ECRL project awards. The
Sumber Raswira Sdn Bhd 11.2 Group requires additional contracts, stemming from limited
EPF 4.69 mega projects offered in town in order to replenish its dried-
Estimated Free Float 55.44 up order book as its on-going projects on hand such as TRX
City, Cyberjaya Hospital, KVMRT 2 are going to complete in
FY2021. We deem that there will be more projects to come
onboard as the catalyst to boost local economy post COVID-
Historical Chart 19 is desperately needed by the government.
1.00

0.90
Earnings Outlook/Revision
0.80
 No change to our earnings est imates as we already
factored in the yearly new target orderbook of
0.70

0.60

0.50
RM300m for FY21-22F.
0.40

0.30
Valuation & Recommendation
0.20
 We maintain BUY call on Gadang with a higher target
price of RM0.59 (from RM0.48). Our revised target
Source: Bloomberg price is now pegged at PE multiple of 9x FY21F EPS
in respect of government’s init iat ive to speed up
Research Team contract awards to stimulus local economy post
COVID-19.
03-87361118, ext. 754
chhow@jfapex.com.my

Please read carefully the important disclosures at end of this publication

29 May 2020 Company Update – Gadang Holdings Berhad JF APEX SECURITIES

Figure 1: Financial Summary

FYE 31 May FY15 FY16 FY17 FY18 FY19 FY20F FY21F
RM'm RM'm RM'm RM'm RM'm RM'm RM'm
Revenue 587.4 675.4 553.9 596.1 699.9 686.9 802.9
EBITDA 105.8 148.4 168.9 165.3 81.8 75.6 85.4
EBIT 87.4 127.1 143.8 133.5 75.9 71.5 78.9
PBT 84.9 124.5 141.6 132.6 71.0 67.0 74.5
PAT 61.0 94.7 100.6 96.9 43.6 43.9 47.0
Net profit 59.8 94.8 100.1 96.9 43.5 43.8 47.0
Margin (%)
EBITDA margin 18.0% 22.0% 30.5% 27.7% 11.7% 11.0% 10.6%
EBIT margin 14.9% 18.8% 26.0% 22.4% 10.8% 10.4% 9.8%
PBT margin 14.9% 18.8% 26.0% 22.4% 10.8% 10.4% 9.8%
PAT margin 10.4% 14.0% 18.2% 16.3% 6.2% 6.4% 5.9%
Net profit margin 10.2% 14.0% 18.1% 16.3% 6.2% 6.4% 5.9%

EPS (sen) 8.2 13.0 13.8 13.3 6.0 6.0 6.5

P/E 11.1 7.0 6.6 6.8 15.2 15.1 14.1
Net gearing Net Cash Net Cash Net Cash 0.8% 19.5% 22.8% 25.5%
ROE 15.4% 17.7% 15.9% 13.7% 5.9% 7.1% 9.1%
DPS (sen) 0.05 0.07 0.03 0.03 0.01 0.01 0.01
Dividend Yield (%) 5.5% 7.7% 3.3% 3.3% 1.3% 1.1% 1.1%
Source: Company, JF Apex

2
29 May 2020 Company Update – Gadang Holdings Berhad JF APEX SECURITIES

JF APEX SECURITIES BERHAD – CONTACT LIST

JF APEX SECURITIES BHD DEALING TEAM RESEARCH TEAM

Head Office: Head Office: Head Office:

6 th Floor, Menara Apex Kong Ming Ming (ext 3237) Lee Chung Cheng (ext 758)
Off Jalan Semenyih Shirley Chang (ext 3211) Lee Cherng Wee (ext 759)
Bukit Mewah Norisam Bojo (ext 3233) Nursuhaiza Hashim (ext 752)
43000 Kajang How Chi Hoong (ext 754)
Selangor Darul Ehsan Institutional Dealing Team:
Malaysia Zairul Azman (ext 746)
Ahmad Mansor (ext 744)
General Line: (603) 8736 1118 Nur Nadia (ext 741)
Facsimile: (603) 8737 4532
PJ Office:
PJ Office: Mervyn Wong (ext 363)
15 th Floor, Menara Choy Fook On Azfar Bin Abdul Aziz (Ext 822)
No. 1B, Jalan Yong Shook Lin Joanne Tan Hui Bin (Ext 111)
46050 Petaling Jaya
Selangor Darul Ehsan
Malaysia

General Line: (603) 7620 1118

Facsimile: (603) 7620 6388

J F AP E X SE CUR IT IE S - RESEARCH RECOMMENDATION FRAMEWORK

STOCK RECOMMENDATIONS
BUY : The stock’s total returns* are expected to exceed 10% within the next 12 months.
HOLD : The stock’s total returns* are expected to be within +1 0% to – 10% within the next 12 months.
SELL : The stock’s total returns* are expected to be below -10% within the next 12 months.
TRADING BUY : The stock’s total returns* are expected to exceed 10% within the next 3 months.
TRADING SELL : The stock’s total returns* are expected to be below -10% within the next 3 months.

SECTOR RECOMMENDATIONS
OVERWEIGHT : The industry as defined by the analyst is expected to exceed 10% within the next 12 months.
MARKETWEIGHT : The industry as defined by the analyst is expected to be within +10% to – 10% within the next 12 months.
UNDERWEIGHT : The industry as defined by the analyst, is expected to be below -10% within the next 12 months.
*capital gain + dividend yield

J F AP E X SE CUR IT IE S BE R HAD – DISCLAIMER

Disclaimer: The report is for internal and private circulation only and shall not be reproduced either in part or otherwise w ithout the prior written
consent of JF Apex Securities Berhad. The opinions and information contained herein are based on available data believed to be reliable. It is
not to be construed as an offer, invitation or solicitation to buy or sell the securities covered by this report.

Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of JF
Apex Securities Berhad and are subject to change without notice. JF Apex Securities Berhad has no obligation to update, modify or amend this
report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth
herein, changes or subsequently becomes inaccurate.

JF Apex Securities Berhad does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such
statement by anyone shall give rise to any claim whatsoever against JF Apex Securities Berhad. JF Apex Securities Berhad may from time to
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JF Apex Securities Berhad (47680-X)
(A Participating Organisation of Bursa Malaysia Securities Berhad)