Gadang expects FY18 to end on weaker note as 3Q profit slips

KUALA LUMPUR (April 24): Gadang Holdings Bhd expects its current financial year ending May 31, 2018, to end on a weaker note from the previous year, due to what it termed "sluggish market condition" of the property sector.

In a quarterly results update, it also said its construction division's ability to contain higher operating cost is "critical" to its overall profitability for the existing, technically more complex infrastructure projects that the group is undertaking.

Its net profit for the third quarter ended Feb 28, 2018 (3QFY18) experienced a marginal 3% year-on-year decline to RM25.14 million from RM25.79 million, on lower revenue contribution from its construction and utility divisions.

The group's overall 3QFY18 revenue, however, was up 19% y-o-y to RM152.68 million from RM128.05 million .

For its cumulative nine months ended Feb 28 (9MFY18), Gadang’s net profit was up a slight 2% y-o-y to RM71.85 million from RM70.39 million, as revenue gained 9% y-o-y to RM412.29 million from RM379.02 million.

Meanwhile, Gadang said its construction division is cautiously tendering for larger government infrastructure and building projects. To date, it has an outstanding order book value of some RM1.59 billion.

Its property division, on the other hand, has a total landbank size — including from joint venture projects — of 442.2 acres, with a total estimated gross development value (GDV) of RM3.89 billion.

Gadang noted that this division will remain focused on affordable homes in line with the present market demand. Its unbilled sales to-date stood at RM134 million.

As for its utility division, Gadang said recurring income from its four operating water treatment plants is expected to remain stable. “The mini hydro project of 9MW in Indonesia is expected to be income generating by the second quarter of the financial year 2019,” Gadang added.

Shares in Gadang closed 1.5 sen or 1.77% lower at 83 sen yesterday, for a market capitalisation of RM549.23 million. Over the past 12 months, the stock has declined about 33% from RM1.24. — theedgemarkets.com

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