Rakuten Trade Research Reports

Author: rakutentrade   |   Latest post: Tue, 21 May 2019, 6:16 PM


Gagasan Nadi Cergas (0206) - Moving up its value chain

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Gagasan Nadi Cergas Bhd ("GNC") is making its debut on the Ace Market. It is a Grade G7 contractor which enable the company with unlimited project tendering value capacity. BUY with a target price of RM0.36 based on 8x PER FY19 of Bursa Malaysia Small Cap Index. 

GNC has a track record of delivering sizeable and quality projects for over 20 years. Among the notable projects are German-Malaysian Institute ("GMI"), student hostels for Universiti Teknikal Malaysia Melaka ("UTeM") and International Islamic University Malaysia ("IIUM"). To date, GNC has an orderbook of more than RM600m, which includes the RM290m worth of Cardiology Centre for Serdang Hospital, providing earnings visibility until 2021. 

The Group currently holds 4 long term recurring income contracts including two 20-year concession to provide facility management services for IIUM and UTeM until 2034 and 2037 respectively. GNC also operates district cooling system and has a 20-year chilled water supply contract with GMI until 2028. The other upcoming contract will be the 30-year chilled water and electricity supply to Datum Jelatek development scheduled to commence in 1H2019. 

Leveraging on its design and build expertise, GNC has made its maiden foray into property development whereby 33.3% of the IPO proceeds is allocated for the funding for Asian Football Federation ("AFF") mixed development at Putrajaya. All the ongoing and new projects are estimated at a total Gross Development Value of RM464m. Meanwhile, 15.5% of the funds raised will be allocated for the CAPEX of district cooling system and 39.3% is for the working capital for construction projects. 

GNC recommends a dividend policy of up to 30% for FY19, translating to an expected yield of 4.5%. Moving forward, we expect stronger cashflow turnaround backed by its stable recurring income as it has passed the period of CAPEX-heavy spending on concessions.

Source: Rakuten Research - 8 Jan 2019

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