GDB Holdings Bhd (March 12, Unlisted)
IPO fair value (FV) at 41 sen. GDB Holdings Bhd (GDB) is principally involved in the provision of construction services, focusing on high-rise residential, commercial and mixed development projects in Malaysia as main contractor and principal work contractor.
As a construction services provider, GDB has a track record of completing all projects ahead of the contractual completion date, besides providing solutions which are reliable in terms of quality and safety. GDB also selectively engages subcontractors to carry out different parts of its construction activities particularly those requiring other specialised trade work for operating costs’ efficiency.
As at Feb 6, the group had an outstanding order book of RM854.9 million, which comprises mainly of building jobs such as Westside IlI in Desa ParkCity, Etiqa Office Tower along Jalan Bangsar, Aira Residence in Damansara Heights and Menara Hap Seng 3 within the Kuala Lumpur city centre.
We understand that tender book stood at RM817 million for hotel, residential and office construction works. Our FV is 41 sen based on a around nine times price earnings ratio multiple to its FY2018F earnings per share of 4.6 sen.
The initial public offering is expected to raise approximately RM43.8 million from the issuance of 125 million new shares, with 56.4% of its proceeds to be utilised for capital expenditure and 35.6% of proceeds as working capital that are earmarked to drive future growth.
GDB’s growth will focus on growing business in high-rise building construction further, expansion of construction business to other building segments, expansion into civil and infrastructure construction services, and purchase of a new office, additional construction machinery and equipment as well as land for storage.
GDB’s competitive strengths include: experienced and a technically strong management team, a proven track record in terms of delivery schedule, quality and safety, adoption of construction practices that optimise project efficiencies, established relationships with customers and suppliers, and investment in technologies for improved efficiency.
The key drivers of catalyst may include: rising disposable incomes, and government initiatives to spur socio-economic development which may encourage stronger demand for properties, and government expenditure on infrastructure development and social amenities, and domestic and foreign direct investments that drive overall economic growth, which could encourage stronger pickups in construction activity.
The key downside risks include competition risk, dependency on the services of subcontractors, dependency on foreign workers, and reliance on major customers. — PublicInvest Research, March 12
This article first appeared in The Edge Financial Daily, on March 13, 2018.