The group announced that its wholly-owned subsidiary, Gadang Engineering (M) Sdn Bhd has on 20 August 2018 received and accepted a letter of award from TRX City Sdn Bhd to undertake the proposed construction and completion of Public Realm Works (Phase 1) at Tun Razak Exchange.
Contract sum for the project is RM86m and shall commence on 1 September 2018 and to be completed by 3Q2019.
Comments
Outstanding orderbooks stands at RM1.59b after accounting for this newly clinched project. The outstanding jobs will sustain the group’s revenue visibility to 2.5 years or 2.5 times of FY18 revenue.
The project meets 28.7% of our target orderbook replenishment for FY19. Our target orderbook replenishment for FY19 is RM300m.
The project could translate into EPS of c.1sen spanning across one year. Assuming net profit margin of 8%, the project could contribute RM6.88m to the group’s bottom line.
Earnings Outlook/Revision
We retain our earnings forecasts for FY19 and for FY20 as the project clinched is within our target orderbook replenishment.
Valuation/Recommendation
Maintain BUY on Gadang with an unchanged target price of RM1.21. We peg our valuation to 8.7x FY19F.
Looking forward, we are sanguine on Gadang’s earnings which will be underpinned by property unbilled sales of RM 101m on top of its sizeable construction order book of RM1.59b.
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