GDB’s 9M21 PATAMI of RM21.3m (+24% YoY) were within our expectations at 69% of forecasts. We anticipate a pick-up in billings in 4QFY21 as GDB has ramp up to full capacity by end-Sept. Orderbook stands at RM1.7bn translating to a sizable 4.6x cover. Overall, we reckon a stronger showing going into 2022 and gradual recovery in private sector tender opportunities lifted by recovery in business prospects should boost stock sentiment. Maintain forecasts. Maintain BUY with unchanged TP of RM0.63 pegged to 10x P/E multiple ex-cash. Key risks include execution, elevated material prices and Covid-19 setbacks.

Within expectations. GDB reported 3QFY21 results with revenue of RM88.3m (+9.3% QoQ, -8.0% YoY) and core PATAMI of RM6.5m (+24.2% QoQ, -13.0% YoY). This brings 9MFY21 core PATAMI to RM21.3m, increasing by 24.1%. The results were within our expectations at 69% of our FY21 full year forecasts. We are expecting a stronger finish to the year with full operational ramp up in 4Q. Note that quarterly earnings are adjusted for RM0.1m of unrealised investment losses.

Dividends. No DPS was declared for the quarter as they are normally declared in 2Q and 4Q (9M20 DPS: 0.67; 9M21 DPS: 0.70).

QoQ. Core PATAMI rebounded by 24.2% driven by more optimal stages of construction and increase in construction activities for on-going projects as evidenced by higher revenue (+9.3%). This was achieved in-spite of longer lockdown period in 3QFY21 vs 2QFY21. GDB was only allowed to fully resume operations in mid-August- 21 and 100% ramp was achieved towards the end of Sep-21.

YoY. Core PATAMI declined -13.0% dragged by lower revenue of -8.0% resulting from lockdowns as explained above. Further exacerbating this on a YoY basis is the building materials supply issues as they were kept at “warm idle” until Phase 2 of NRP which was implemented in early Sep-21. There were also other incremental costs which added to the cost pressure such as elevated materials costs and SOP compliance costs.

YTD. GDB’s core PATAMI expanded by 24.1% to RM21.3m driven by: (1) low base effect with 2QFY20 reflecting roughly 4 weeks of hard lockdown (2) contribution from its 8 Conlay project and (3) advance phases of construction for some project sites.

Outlook. GDB’s orderbook stands at RM1.7bn translating to a sizable 4.6x cover on FY20 revenue to be executed over the next 2-3 years. Replenishment has been difficult this year after: (1) dialling back on tenders after a bumper FY20 and (2) overall slow conversion due to repeated lockdowns. Tender book stands at RM1.3bn broken down into: commercial & hotel, residential, office and mixed development. Approximately 2/3rd of outstanding tenders were called last year with awards delayed due to pandemic exacerbated by escalating costs. We learnt that fresh tenders for these were resubmitted recently. Overall, we expect a stronger showing in 4Q and a gradual recovery in private sector tender opportunities in-line with anticipated recovery in business prospects going forward.

Forecast. Maintained forecast as earnings are within expectations.

Maintain BUY, TP: RM0.63. Maintain BUY with unchanged TP of RM0.63 post earnings adjustment. Our 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 9 sen. We believe this is justified given GDB’s solid balance sheet as well as high ROE. Key risks include execution, rising material prices and Covid-19 setbacks.

Source: Hong Leong Investment Bank Research - 19 Nov 2021