GDB is principally involved in the provision of construction services, with a focus on high rise residential, commercial and mixed developments as main contractor and principal works contractor. 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.

GDB’s outlook is getting better underpinned by the encouraging vaccination progress that will enable it to pick up in billings in 4QFY21. The company has ramped up to 100% operating rate since early Sept for its Peninsular projects which make up 94% of its outstanding order book while its HCKK project in Sabah remains at 60% operating capacity plagued by the state’s relatively slow vaccination progress.

Currently GDB’s order book stood at RM1.8bn translating to a sizable 5.0x cover on FY20 revenue to be executed over the next 2-3 years. Meanwhile, its tender book stands at RM1.7bn broken down into: (i) commercial & hotel - 38%, (ii) residential - 31%, (iii) office - 19% and (iv) mixed - 12%. Tender book of RM1.7bn could see award decision by year-end; we have baked in nil for FY21.

GDB’s TP is based on FY22 EPS of 5.4 sen pegged to an ex-cash PE multiple of 10.0x plus net cash per share of 10 sen. We believe this is justified given GDB’s solid balance sheet as well as high ROE.

After plunging 51.3% from a high of RM0.72 (22 Jan) to a low of RM 0.35, GDB staged a mild rebound to close at RM0.465 yesterday. Currently, GDB is pending for a bullish cup and handle formation. A successful breakout above its neckline would signal a new uptrend had begun, potentially lifting the stock towards 0.50-0.55-0.60 levels. Collection range is located at RM0.42-0.44-0.465. Cut lost at 0.415.

Source: Hong Leong Investment Bank Research - 23 Sept 2021