GDB’s FY21 PATAMI of RM31.1m (+21% YoY) was within our expectations at 100% of forecasts. We anticipate continued pick-up in billings for FY22 as GDB in-line with reduced restrictions. Orderbook stands at RM1.54bn translating to a healthy 3.7x cover. Overall, we expect a stronger showing going into 2022 and a gradual recovery in private sector tender opportunities in-line with anticipated recovery in business prospects going forward. Maintain forecasts and BUY with unchanged TP of RM0.63 pegged to 10x P/E multiple ex-cash. Key risks include replenishment, execution, rising material prices and Covid-19 setbacks.

Meets expectations. GDB reported 4QFY21 results with revenue of RM144.8m (+64.1% QoQ, +13.1% YoY) and core PATAMI of RM9.8m (+50.2% QoQ, +14.5% YoY). This brings FY21 core PATAMI to RM31.1m, increasing by 20.9%. The results were within our expectations at 100% of full year forecasts. Note that quarterly earnings are adjusted for RM1.3m of goodwill impairment.

Dividends. DPS of 0.7 sen was declared going ex. on 14 Mar-22 (FY21 DPS: 1.4 sen; FY20 DPS: 1.33 sen).

QoQ. Core PATAMI surged by 50.2% in-line with its top-line rebound of 64.1% due to advanced stages and increase in construction activities with all sites operational but with varying productivity levels during the quarter. Its project in Sabah was the last to cross the required vaccination threshold for full operating capacity (achieved in end Sept-21).

YoY. Core PATAMI increased by 14.5% which likewise is revenue driven (+13.1%) as progress for key projects have reached more optimal phases of recognition this quarter. This was achieved despite a later reopening in 2021 vs 2020.

YTD. GDB’s core PATAMI expanded by 20.9% to RM31.1m underpinned by 17.1% growth in revenue due to factors highlighted above. This was achieved in spite of a pandemic riddled year, aided by higher levels of outstanding orderbook.

Outlook. GDB’s orderbook stands at RM1.54bn translating to a healthy 3.7x cover on FY21 revenue to be executed over the next 2-3 years. Replenishment has been difficult in FY21 coming away empty handed after: (1) dialling back on tenders after a bumper FY20 and (2) overall slow conversion due to repeated lockdowns. Most of outstanding tenders called last year saw awards delayed due to pandemic exacerbated by escalating costs. Management is targeting RM550m replenishment in FY22 with award decision likely in 2Q-3Q period. Overall, we expect a better showing in FY22 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 as we keep forecasts unchanged. 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 representing c.20% discount to the trading P/E multiple of the KLCON, which we believe is fair for a small cap contractor. Key risks include replenishment, execution, rising material prices and Covid-19 setbacks.

Source: Hong Leong Investment Bank Research - 28 Feb 2022