Financial Highlights

The following table sets out the key financial highlights of our Group for the Financial Years and Period Under Review:

• The revenue grows from RM 98 mil (FYE 2019) to RM 171 mil (FYE 2021). This shows that the company still has room for growth.
• The gross profit margin grew from 12.67% (FYE 2019) to 14.75% (FYE 2020) and declined to 13.76% (FYE 2021). The company’s margin is very dependent on the current year's project. If the main project of the year is a high margin then the GP margin for that year will also increase. (Generally, a GP margin of 20% is considered high/ good).
• PAT margin declined from 7.26% (FYE 2019) to 6.22% (FYE.2021).
• The gearing ratio is 0.61 times (FYE 2021), and the company’s gearing ratio fluctuates because of the nature of the business. However, the company must continue to try to maintain the gearing ratio at a healthy level of 0.25 ~ 0.5. (A good gearing ratio should be between 0.25 – 0.5).

Major customer and Supplier

Major Customers

The Group’s top 5 major customers for the Financial Years Under Review are as follows:

Notwithstanding that certain major customers of the Group had contributed substantially to the company’s revenue during the Financial Years under Review, the Group is not dependent on any particular customer. This is due to the nature of the Group's business which is project based where the revenue contribution from major customers varies from year to year given the nature of the business being conducted on a contract basis, which typically ranges from 2 to 3 years.

Due to the nature of the group’s business, the company has to continue to secure contracts with new customers with equivalent or higher value to replace existing contracts that have been completed, deferred, or terminated. Else, the company's financial performance will be affected once the existing contracts have been completed, deferred, or terminated.

Major Suppliers

The Group’s top 5 major suppliers for the Financial Years Under Review are as follows:

According to the details, the top 5 suppliers are 24.07%. The company mentioned they are not dependent on any suppliers as the subcontracted services and materials are widely available and can be sourced from other suppliers. The Group does not enter into any long-term agreements with the subcontractors and suppliers as the subcontractors’ and suppliers’ contracts are usually on a contract-to-contract basis which is based on the requirements of the relevant construction contracts.

Industry Overview

According to Vital Factor Consulting’s research, In 2021, the construction industry declined by 5.2% as the industry faced limitations on operating capacity due to movement restrictions and foreign labour shortages which was exacerbated by the

closure of international borders arising from the COVID-19 pandemic (Source: Bank Negara Malaysia (BNM)). For the first 9 months of 2022, the real GDP of the construction industry grew by 3.3% compared to the corresponding period in 2021 (Source: DOSM). The real GDP of the construction industry is estimated to grow by 2.3% in 2022 and forecasted to grow by 4.7% in 2023 following a better performance in all subsectors, supported by the implementation and acceleration of infrastructure projects, approved investment projects in the manufacturing sector, construction of affordable houses and Government incentives that encourage homeownership. (Source: MoF)

In 2021, the value of civil engineering construction work completed in Malaysia decreased by 12.1% compared to the previous year. Roads and railways represented 62.1% of the total value of civil engineering construction work completed in 2021, followed by utility and other civil engineering projects at 25.6% and 12.3% respectively in Malaysia (Source: DOSM). Government spending will continue to be a major driver of growth for the civil engineering sector. For further information on major infrastructure projects under Budget 2022, please refer to Section 8 of this report. For the first 9 months of 2022, the value of construction work completed in Malaysia for the residential and non-residential segments grew by 2.8% and 18.6% respectively compared to the corresponding period in 2021. Civil engineering construction work completed in Malaysia for the first 9 months of 2022 declined by 2.7% compared to the corresponding period in 2021. In Federal Territories and Selangor, the value of construction work completed declined by 4.7% and 1.0% respectively for the first 9 months of 2022 compared to the corresponding period in 2021 mainly contributed by the decline in the residential and civil engineering segments. (Source: DOSM)

The market size of the building construction industry and share of Vestland Group are estimated as follows:

Source: Vital Factor Consulting

Business strategies and plans for VESTLAND BERHAD

Moving forward, the company will continue to strengthen and leverage its core competency in building construction as well as continue our expansion into the design and build projects to support the business growth. The strategies and plans are as set out below

1. The company continues to strengthen its core competency in construction services
   1. Continue to expand on the order book.
   2. Expand on the design and build capabilities
   3. Expand on civil engineering capabilities.
2. The company acquisition of New Head Office.

MQ Trader View

Opportunities

1. The company has construction projects across different states in Malaysia. The company is able to diversify potential geographical risks and will not be particularly affected if there is a slowdown of construction activities in any particular state. In addition, the Group will have better flexibility to bid for more jobs as it has established a track record in different states which would serve as an important reference site with potential customers in addressing future opportunities.
2. The company has ongoing projects to sustain in the near or near-midterm. The company has 14 ongoing projects with a total outstanding order book value of approximately RM947.43 million. The company order book is project-based and typically non-recurring. The outstanding order book is expected to be recognized progressively over the next 4 financial years

Risk

1. The business and financial performance are dependent on the ability to secure new projects to ensure the continuity of the order book to sustain the business. The company has to continue to submit bids and tenders for proposals and compete against its peers to continuously secure new projects.

Click here to refer the IPO - Vestland Berhad (Part 1)

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