We like GDB due to its: 1) strong track record for efficient project management and early completion that bodes well for contract wins and margins enhancement; 2) sizable order book of RM619m provides visibility till 2021; 3) solid netcash of RM81m or 12.9sen/share grants ability to expand quickly and dividend sustainability to meet its 30% dividend payout policy and 4) potential transfer to Main Board listing to attract more institutional investors as it has met the profit test requirement. At RM0.32, GDB is trading at undemanding 7.4x FY19E P/E (14% lower than its peers’ P/E of 8.6x and 22% below ACE market P/E of 9.6x), supported by a decent 4.7% DY. Ex-cash, GDB’s P/E is even more compelling at 4.5x. Technically, GDB is poised for an ascending triangle breakout to retest RM0.36-0.40 in the mid to long term.

Proven track record for quality and early completion of projects. Founded in 2013, GDB is a building contractor, which provides construction services for high rise residential, commercial and mixed development buildings. Its recent proposed acquisition of 70% equity interest in Eco Geo-technics S/B would help GDB to extend its competency and diversifying into major geo-technical and foundation engineering works. GDB is registered with CIDB as a Grade G7 contractor that allows GDB to tender for projects with unlimited value. GDB has also secured Sijil Perolehan Kerja Kerajaan to participate in tenders for Government jobs. Its customers consist of established property developers and large corporations, such as Perdana ParkCity, Selangor Properties, Trans Resources Corporation, Hap Seng Land Development (Puchong) SB and Etiqa Insurance.

Sizeable order book of RM619m as at end Mar30 with earnings visibility to FY21. Over the years, it had completed notable projects such as One Central Park, KL Eco City Project 1, KL Eco City Project 1, Etiqa Office Tower, Westside 3 etc. Meanwhile, its ongoing projects include AIRA Residence in Damansara Heights (RM432m), Menara Hap Seng 3 (RM313m) and Perla Ara Sentral (RM135m). By completing projects ahead of schedule, this helps GDB to lower raw materials and preliminaries cost (ie site management cost, utilities, rental expense of machinery and equipment). We believe this may entice more contract wins in the future, on time and cost saving advantage. As at May 2019, GDB’s tender book of RM2.9bn comprises high-rise residential developments, a mixed development, hotel, and a factory building.

Pending an ascending triangle breakout. GDB is likely to stage an ascending triangle breakout soon, with share prices have been trending above the support trendline (since hitting a low of RM0.22 in Dec 2018) and a bullish close above the 200D SMA or RM0.285 in early June. A successful breakout of the neckline resistance at RM0.34 will lift prices higher towards RM0.36 (61.8% FR), before testing our RM0.40 psychological barrier. On the flip side, key supports are RM0.30 and RM0.295 (support trendline). Cut loss at RM0285.

Source: Hong Leong Investment Bank Research - 12 Jul 2019