Projects completion, new bids spell better quarters for Gadang?

NST Tue, Aug 01, 2023 03:12pm - 8 months View Original


KUALA LUMPUR: Gadang Holdings Bhd is hoping for better quarters ahead given that the group is actively seeking the recovery of outstanding sums from construction projects.

Group managing director Tan Sri Kok Onn, said Gadang has adopted a prudent approach by making provisions for liquidated ascertained damages (LAD) and simultaneously pursuing extension of time claims with the relevant clients.

 He said in this difficult and competitive climate, the group is committed to ensuring the timely completion of all ongoing construction and property development projects. 

"We are bidding for more projects to replenish the order book. With our past track record of securing contracts, we are confident we will be successful in FY24," he told the New Straits Times. 

Gadang is involved in civil engineering and construction, property development, water supply, and mechanical and electrical engineering services.

Kok Onn said the recent commencement of commercial operations of the nine megawatt (MW) mini hydropower plant in Lintau, Tanah Datar in West Sumatera, will further broaden the source of revenue for the group. 

The first 4.5 MW run-of-river hydro power house unit of the plant was synced with the state-owned utility firm Perusahaan Listrik Negara's (PLN) distribution grid system in Balai Tangah, Lintau Buo.

The unit's official commercial operation date (COD) was declared on July 7.

For the second 4.5 MW run-of-river hydro unit, synchronisation to the PLN grid is scheduled for early August 2023, with COD at the month's end.

Kok Onn said the group's 5.9 MW solar photovoltaic energy generating facility located in Tawau, Sabah, will also contribute positively to its revenue once completed and commissioned in the second half of 2024.

Meanwhile, the property division will continue to build mid-range residential projects in FY24 to meet market demand, according to him.

As of May 31 this year, the property division had recorded RM187.85 million in unbilled sales.

Gadang reported a net loss of RM29.32 million in the year ended May 31, 2023 (FY23), against a net profit of RM41.65 million from the previous year. 

Revenue decreased by 24 per cent to RM496.07 million in FY2023 from RM651.99 million a year ago. 

Kok Onn said Gadang was affected by the COVID-19 challenges as well as accounting provisions on potential liabilities arising from LAD amounting to RM3 million and impairments.

Excluding a RM11 million impairment loss on goodwill in the Singapore and Indonesia subsidiaries, a RM9.4 million impairment loss on the 9-megawatt hydro power concession in Lintau (Sumatera Barat) arising from delays caused by social disturbances in land matters and construction issues, a RM7.2 million impairment loss on outstanding receivables and contract assets, an unrealised gain on foreign exchange of RM2.1 million, and other exceptional net l losses of RM1.5 million, the group reported a FY23 core net loss of RM2.7 million.

Kok Onn said the impairments are done to better reflect the financial position of the group after navigating through the unprecedented pandemic.

TA Research is maintaining its FY24 and FY25 earnings forecasts and has introduced a FY26 earnings forecast of RM25.7 million, representing an earnings growth of 7.9 per cent.

As of May 31, 2023, Gadang's outstanding construction order book stood at RM1.2 billion, which could provide earnings visibility to the group at least for the next two years, it said.

TA Research, which is keeping a "sell" call on the stock due to valuation grounds, said it was retaining its target price of 28 sen.

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