Gadang 1Q net profit tumbles 20% on lower construction revenue

KUALA LUMPUR (Oct 28): Gadang Holdings Bhd saw its net profit tumble some 20% to RM16.62 million for the first quarter of its financial year ended May 31, 2017 (1Q FY17) from RM20.86 million as revenue contracted.

According to its bourse filing yesterday, the construction and property player’s revenue for the quarter fell 30% to RM104.6 million from RM149.38 million, due to lower revenue inflow from its construction division, mainly due to the completion of some projects.

“Presently [the construction division’s] outstanding order book stands at some RM603.7 million,” it said. It was reported in July that the company’s order book stood at RM615 million.

“This division is actively bidding for new contracts involving government’s infrastructure and building projects. Ongoing projects are being executed on a fast track basis to optimise on cost saving and design effectiveness.”

Meanwhile, profit before tax for its property division fell from RM16.65 million to RM13.45 million despite an uptick in revenue. The group said this was due to higher development progress achieved for projects with lower margins.

“The property division’s focus is on building affordable homes for the current financial year, in line with market demand. Continuous efforts are directed at securing property joint ventures with landowners having approved development plans,” the company said.

On Oct 13, Gadang secured the development rights for a 24.08-acre (9.74ha) plot of land in Kwasa Damansara, Sungai Buloh from Kwasa Land Sdn Bhd.

Gadang is expected to give Kwasa Land a total financial return of RM165 million for both the land cost and profit sharing.

Gadang closed up one sen or 0.3% at RM3.29 with a market capitalisation of RM850.87 million.

This article first appeared in The Edge Financial Daily, on Oct 28, 2016. Subscribe to The Edge Financial Daily here.