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Moolah
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Posting #1: Wed Sep 5th, 2007 04:08 |
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This review is dedicated to JL, Tanhin and Random,
Here is the track record of Gadang (link to homepage) and from their homepage, Gadang is described as follows:
- The principal activity of Gadang is investment holding while its subsidiary companies' core activities are civil engineering and building construction, property development, manufacturing & trading of decorative & protective paints, mechanical & electrical engineering services.
Here is the recent track record for Gadang.
Here is the link to their latest earnings report (07 Q4) Quarterly rpt on consolidated results for the financial period ended 31/5/2007
*** Do note my calculation of cash balance for Gadang = short term investments + cash balances + fixed deposits ***
Gadang earnings was rather dismal back in 2002 and 2003. However, as can be seen from the earnings table above, its earnings has improved much for the better. The only slight concern is the slight increase in receivables over the past couple of years despite the fact that the balance sheet has improved much for the better.
PROS
(1) Earnings has been improving. And with the construction sector being a posible sector to benefit from the budget, Gadang's prospect could be interesting.
(2) This company can be seen striving to achieve to be a better company. This can be seen clearly by the corporate developments the past few months.
The below are some noteable corporate exercises, plans and announcements posted at Bursa Website. Do note some are just mere MOU announcements.
- Memorandum of Understanding between Gadang Holdings Berhad and Qingxiu District Government, Nanning, China - - Gadang's plan to participate in the investment of a waste water treatment plant in Qingxiu District, Nanning, Guangxi Province, China.
- PROPOSED ACQUISITION OF 85% EQUITY INTEREST OF PT. HANARIDA TIRTA BIRAWA ("PROPOSED ACQUISITION") - - The Proposed Acquisition will increase Gadang's interests in the treated water supply and concession business in Indonesia. The treated water supply will increase by 600 litres per second in 2008, slightly over twice the capacity of the water treatment plants currently operated by AUPL.
- Update on the status of the Joint Venture Agreement entered into between Splendid Pavilion Sdn Bhd and Multiforum Sdn Bhd for the development of land in Segambut, Kuala Lumpur
- Letter of Acceptance For Proposed Construction And Completion Part Of Projek Lebuhraya Kemuning - Shah Alam (LKSA), Highway Stretch From Kota Kemuning Interchange To Alam Impian Township in Shah Alam - The contract sum awarded for the Contract is RM278,880,000 (Ringgit Malaysia: Two Hundred Seventy Eight Million and Eight Hundred Eighty Thousand Only). The construction period of the Contract is twenty-four (24) months from 1 September 2007, the date for possession of site and the date of completion for the whole of the works under the Contract is 31 August 2009.
Some recent news clips
Gadang in talks to buy more land
By Zurinna Raja Adam
zurinna@nstp.com.my
July 12 2007
PROPERTY developer Gadang Holdings Bhd is in talks to acquire six hectares of land, with an estimated gross development value (GDV) of RM150 million, in Shah Alam and Penang.
Executive director Ling Hock Hing said the group hopes to finalise talks with landowners within the next three months, and plans to start construction work within two years.
Gadang has a total landbank of about 48ha in the Klang Valley, with a total GDV of RM120 million, sustainable until 2012.
Gadang may clinch RM300m hospital deal
By Sharen Kaur
sharen@nstp.com.my
August 10 2007
CONSTRUCTION and engineering firm Gadang Holdings Bhd may soon clinch a RM300 million deal for a hospital project in Cheras, Kuala Lumpur.
Managing director and chief executive officer Datuk Kok Onn said the group's unit, Gadang Engineering Sdn Bhd, is finalising talks with the Government for the proposed construction of the Lady Templer Rehabilitation Hospital.
"We have tendered for over RM1.5 billion worth of government and private sector jobs where we can expect a success rate of more than 20 per cent. The hospital project is just one of the contracts we are looking at," Kok told Business Times.
The Lady Templer Rehabilitation Hospital will deal with post-road accident cases, stroke victims, brain injury patients and other physically crippling injuries.
Gadang on a high
KUALA LUMPUR: Gadang Holdings Bhd sees buoyant earnings for the financial years ending May 31, 2008 (FY08) to FY10 on the back of a burgeoning order book, said managing director and chief executive officer Datuk Kok Onn.
“We've been working hard. Hopefully, our engineering and construction order book will touch RM1bil by the middle of next year,” he told StarBiz yesterday.
The second board-listed company is involved in civil engineering and building construction, property development, manufacturing and trading in decorative and protective paints, mechanical and electrical engineering (M&E) services as well as treated water supply and concessions.
At present, the engineering division has an order book of some RM600mil, which could sustain earnings for the next two years. Gadang also has submitted proposals and tenders worth some RM1.5bil.
Its current property projects can be viewed at iproperty website, Taman Seri Bukit Segambut, Mandy Villa, M.Avenue 3 & 4 storey Retail & Offices ,M.Avenue 3 & 4 storey Retail & Offices
Concerns
(1) Receivables increased.
(2) Couple of points that needs to be mentioned.
Open the word file attached to Gadang's latest earnings and have a look at their segmental reporting.
Its construction and property division are making money however its trading of protective and decorative coatings and its water division are NOT doing well. (yet?)
(3) And as can seen, whatever info is all from Bursa website and news articles. Hence there isn't any coverage from any research houses. (Is this that bad?)
Recommendation
Ok.. i have to deviate here ... i believe in order to maintain the integrity of this website, do understand that i cannot be recommending any stocks in this section. ok?
This initial posting is made.. in HOPE that more members would make an attempt to make a review of stocks that they like.
Comments are most welcomed for this posting!
:s81:
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PeG
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Posting #2: Wed Sep 5th, 2007 11:04 |
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Daily chart of Gadang:
(phew... luckily I got fast fingers :s3
Attachment: Gadang.PNG (Downloaded 32 times)
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DISCLAIMER: I AM ALWAYS WRONG.
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tanhin
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Posting #3: Wed Sep 5th, 2007 11:30 |
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PETALING JAYA: Gadang Holdings Bhd said its wholly-owned unit, Gadang Engineering (M) Sdn Bhd, and Pembinaan Punca Cergas Sdn Bhd have WON a RM278.88mil job to build part of the Lebuhraya Kemuning-Shah Alam Highway.
Pembinaan Punca is its 50:50 joint venture partner.
In a filing with Bursa Malaysia yesterday, the company said the letter of acceptance was awarded by Projek Lintasan Shah Alam Sdn Bhd.
It will involve undertaking the project from Kota Kemuning Interchange to Alam Impian township in Shah Alam.
Package 2 of the project has been awarded to Mudajaya Corp Bhd.
Construction works is expected to be completed within 24 months from Sept 1.
Gadang said the project was expected to have a positive impact on group earnings and net assets for the financial years ending May 31, 2008 and 2009.
Dear Moola,
I think with this 279millions Jv projects that is suppose to complete by 24 months plus 600millions order book in hand and with ~15% margin, I would expect about 50millions per year of profit for 08 and 09 more than enough to sustain the earning and cover the losses of other sector
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Moolah
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Posting #4: Wed Sep 5th, 2007 11:47 |
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My Dearest PeG,
Many thanks for contributing the chart!
:s81:
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My dearest Tanhin,
If you open the earnings notes in the Q4 announcement, the losses in the trading of protective and decorative coatings is relatively small - only 1.4 million and then the water project losses is only at 660k.
For the water consession, i believe this is a rather a new project for Gadang. I would guess that it's rather too early to pass judgement on it.
Regarding the highway building contract it won with Mudajaya. I believe that it is ok to be positive with it. Gadang is a small contractor and this is the beauty of being small. Projects like this is a spit in the ocean for the big boys but for small players like Gadang, this probably should be a decent job which should boost its fortunes.
rgds
:s81:
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tanhin
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Posting #5: Wed Sep 5th, 2007 11:58 |
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Yes,that is why yesterday I highlighted to you it is not too bad a company.....and you can see though the receivable increased quite substancially , the liabilities had been reduced to a managible amount.I will dig into the receivable if I can find the info
I would think the management had a good point.thanks
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Moolah
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Posting #6: Wed Sep 5th, 2007 12:05 |
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tanhin wrote: Yes,that is why yesterday I highlighted to you it is not too bad a company.....and you can see though the receivable increased quite substancially , the liabilities had been reduced to a managible amount.I will dig into the receivable if I can find the info
I would think the management had a good point.thanks
Ahh... and this is why I blogged on it this morning. And since I blogged on it, I thought I cheat a bit ( can ah? ) and use this posting as a kick starter for this forum.
I noted that this stock had a nice move b4 all hell broke loose... and in fact the article on the 17th Aug, was a main page article on Star Biz on the stock. I guess the company did not have a good timing for the release, eh?
cheers
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JL
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Posting #7: Wed Sep 5th, 2007 18:09 |
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Dearest Moo Moo,
Thank you for ur posting.
From what u post, I notice 2 issues :-
1) very thin net profit margin.
Is this the normal margin for a construction company ??
2) the receivables
What r the chances of this increasing receivables turn into bad debt?
P/S: Sorry for the short comment. I m not so good in this stuff hor. :s25:
Last edited on Wed Sep 5th, 2007 18:10 by JL
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Moolah
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Posting #8: Thu Sep 6th, 2007 02:02 |
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My Dearest JL,
From what u post, I notice 2 issues :-
1) very thin net profit margin.
Is this the normal margin for a construction company ??
2) the receivables
What r the chances of this increasing receivables turn into bad debt?
1. Very spot on. The net profit margin is rather thin. And yes this could be a concern.
2. Receivables. It's a slight concern only - not a worry.
Receivables at 104.838 million represents 46.4% of its annual sales revenue. Which is still acceptable. For me, there's no set or fixed guide line to watch for but as long as the receivables does not go over more than 60% of its sales revenue.
Things would turn really scary if the company's debts increases at a rapid rate along with it its receivables. And this does not really make any sense cause if the receivables has any value or the receivables can be collected, then there is no reason to borrow more money. In real life, it's rather a no brainer too ask "Why borrow more money if people owes you more money?". And this was the classic death signal seen in Megan Media.
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tanhin
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Posting #9: Wed Oct 3rd, 2007 05:43 |
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Dear Moola,
I think with this 279millions Jv projects that is suppose to complete by 24 months plus 600millions order book in hand and with ~15% margin, I would expect about 50millions per year of profit for 08 and 09 more than enough to sustain the earning and cover the losses of other sector
The profit margin in the construction section is roughly 15% consider fat by any standard......
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Moolah
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Posting #10: Wed Oct 3rd, 2007 05:58 |
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It's a huge task for me to estimate this JV.
Hence I will refrain from commenting on it.
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