Friday, December 27, 2013

Gadang - explosive earning growth from 2014 to 2016

Its prospects remain bright due to sizeable outstanding order book of rm1.26 billion, total rm425 million worth of property launches earmarked for FY2014, intention to boost its utility division by increasing capacity in existing water treatment business while diversifying in to mini hydro power generation, potential of winning more projects under the construction division a it is bidding for projects worth rm6 billion in total and explosive earnings growth from FY2014 to FY2016.

Gadang’s current outstanding order book of rm1.26 billion comprising MRT package V2, Shah Alam Hospital and RAPID earthwork would be able to provide earnings visibility for the next 3 years from Nov 2013.

The group is also targeting for projects worth more than rm6 billion in total.

Near term order book replenishment could come from the second phase of RAPID worth estimated rm300 million, expected to be awarded by earlier 2014 after having clinched the site work in the first phase.

It derived its recurring income solely from its utility division, in which the group treats 880 litres per second of water via 3 concessionaires in Indonesia while currently (Nov 2013) in negotiation to increase the capacity to 1250 lps.

Apart from that the group is set to diversify the utility business by venturing into mini hydro power generation.

However the contribution from the new business would only kick in over the longer term as the construction of infra and facilities around two years from Nov 2013.

Gadang’s cash piles ballooned to rm83 million in FY2013 mainly due to the variation order arising from the KLIA2 project.

Its net gearing as of FY2013 was close to zero thus providing the group ample room to gear up for further land bank acquisition as well as supporting its venture into the power generation business.

Besides the group is also contemplating to distribute dividend on a regular basis by adopting a stated dividend policy to reward long term investors should the cash flow continues to be stable.

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Please note that all data given are merely blogger's opinion. It is strongly recommended that you do your own analysis and research before investing.