Construction, property segments pull Gadang 3Q net profit down 10% q-o-q

KUALA LUMPUR (April 29): Gadang Holdings Bhd saw its net profit for the third quarter ended Feb 28, 2021 (3QFY21) slide 10.4% to RM2.84 million from RM3.16 million seen in the immediately preceding quarter (2QFY21), due to lower revenue recorded.

Its revenue fell 17.37% quarter-on-quarter (q-o-q) to RM138.91 million from RM168.12 million, dragged mainly by lower construction activities and lower work progress for its property development projects, the company’s filing with the local bourse showed.

Earnings per share dropped to 0.39 sen, from 0.43 sen in the immediate preceding quarter.

On a year-on-year (y-o-y) basis, Gadang’s net profit plunged 71.73% from RM10.03 million, while revenue fell by more than one-third from RM212.14 million. It attributed the poorer performance to lower contribution from both the construction and property divisions.

The group noted that its construction segment revenue for the current quarter (3QFY21) decreased 38% to RM90.05 million, compared to RM145.82 million in the corresponding quarter of the preceding year.

Profit before tax for the segment fell 68% to RM2.26 million, from RM6.97 million a year before.

For the property segment, its revenue also dropped 30% y-o-y to RM42.35 million from RM60.17 million, while profit before tax fell 59% to RM5.98 million from RM14.42 million a year earlier.

For the cumulative nine months ended Feb 28, its net profit dived 82% y-o-y to RM6.55 million from RM35.72 million, while cumulative revenue fell 24.22% y-o-y to RM422.42 million from RM557.46 million.

On its prospects, the company’s board anticipates that the current financial year performance will be lower, due to the challenging and depressed market conditions.

While movement control order (MCO) 2.0 might have dampened the construction sector's road to recovery, it said with the recent reaffirmation of large infrastructure projects such as Mass Rapid Transit 3, the catalyst remains positive.

Gadang said it will focus on project execution while pursuing new opportunities to replenish its order book, which currently stands at RM624 million, which will be able to sustain its operations for the next two years.

Its construction division will also continue to monitor and implement effective cost control measures, in view of the competitive and lower margin business environment, it said.

Meanwhile, the group is planning to launch two new phases of development projects in the second half this year. As at Feb 28, 2021, the division recorded RM132 million in total unbilled sales.

As for its utility division, it said the concession water treatment assets in Indonesia will continue to contribute a stable and sustainable recurring income stream to the group.

However, it noted that the Covid-19 pandemic and recent heavy rains and landslides have significantly delayed the testing and commissioning of the mini-hydro power plant.

Furthermore, it cautioned that the volatility of the foreign exchange rates may impact the division's performance in the current financial year.

Gadang’s share price was unchanged at 42.5 sen today, bringing a market capitalisation of RM309 million. There were 1.62 million shares traded.

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