SOS Read this before you INVEST in Stocks
SOS Will Gadang FYE17 results better than FYE16? Part 8
sosfinance
Publish date: Wed, 11 Jan 2017, 07:01 PM
sosfinance
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VALUATION DOES NOT DETERMINE THE PRICE, IT'S JUST A TOOL TO ESTIMATE A VALUE OF A BIZ
www.sosfinancialplanning.blogspot.my
"How do you save RM50,000? - I shared with a friend on how to do it. I got a term life for RM280 p.a covering RM100k until 70 years old. I cancelled my wholelife insurance of RM2,800 p.a. for the same coverage up to 100 years old. Save RM2500 p.a x 20 years = RM50,000. (PM0122037325)
.....IS THIS ARTICLE FAKE OR FACT?? ANYONE CAN CONFIRM?
www.sosfinancialplanning.blogspot.my
"How do you save RM50,000? - I shared with a friend on how to do it. I got a term life for RM280 p.a covering RM100k until 70 years old. I cancelled my wholelife insurance of RM2,800 p.a. for the same coverage up to 100 years old. Save RM2500 p.a x 20 years = RM50,000. (PM0122037325)
.....IS THIS ARTICLE FAKE OR FACT?? ANYONE CAN CONFIRM?
AVERAGE OF PAST 3 YEARS CONSTRUCTION DIVISION
1. Average revenue of about RM456m p.a.
2. Average PBT of about RM52m p.a.
FYE17Q1 - Outstanding book order is RM603.7m
It is a concern, but not a panic. Based on the average revenue, the said book order can last about 16 months from 31 August 2016. So, it is not entire impossible to achieve about RM50m in the construction since the managment did mentioned there are some VO outstanding.
Should we panic now, no. Concern, yes. However, 4 months has passed since 31/8/16, only about 12 months left to secure new contracts.
WHAT ABOUT PROPERTY CONTRACTS
1. Kwasa Land (GDV of about RM700m)
2. Puchong Land (just announced today 11/1/17)
3. Solar Panel Power Plant in Sabah (announced Jan 2017) - updated 21 Jan 2017 (Management said about RM40m only)
Many has down played these 2 contracts, due to concern about "property" problems. Another valid concern. However, one must look at each project on a case to case basis. That, judgement is required. Similar to construction project, it takes time to implement. But the margin is much higher.
SHOULD WE BE OVERLY CONCERN ABOUT PROPERTY DEVELOPMENT COST OF RM496 MILLION?
No. About RM100m is for purchase of Semenyih Land. Another RM140m is JV on Cyberjaya Land (Laman View). So, all the sharing of Capital City is real cash. Management said it progresses well although sale was slightly more than half. So, this year, Capital City will contribute a lot more than FYE16.
As I have mentioned a couple of time, >80% of the PBT sharing for Capital City is not taken in yet, so upside is there.
SHOULD WE BE WORRIED ABOUT ITS CASH BALANCES OF RM284 MILLION AS AT 31/8/16?
1. Gadang gross cash is about RM284million@31/8/16.
2. Total cost of borrowing is about RM200 million at average cost of 7%. If fully paid down, PBT is about RM14 million.
3. Am sure Gadang has better use of it, to get a PBT return of higher than 7%.
WHAT ABOUT VALUATION TODAY?
1. Market cap is about RM670m.
2. Net cash is about RM82m.
3. Market Cap less Net Cash = RM588m,
4. Estimated profit FYE17 by analysts = RM100m
5. PER = 5.8x
6. Market PE for construction is about 6-12x.
7. Gadang will be good for CNY for those who participate?
8. Capital City can maintain the PAT about RM90m for FYE17 and FYE18, just nice for other projects to kick in.
9. A fair value of RM4.00 (before bonus/split) is only at PE10x, attainable once it gets another construction contracts in 8-10 months i.e. by Dec 2017. (Instead, Gadang got Kwasa Land, Puchong Land and Solar Panel projects)
DISCLAIMER
For information only. Not a buy, sell or hold recommendation.
(Last but not least, probability FYE17 earnings is better than FYE16 is high, due to vo, capital city and laman view DISREGARD any new construction contracts secured).
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Discussions
5 people like this. Showing 6 of 6 comments
Shareholders' Fund @ 31/8/16
RM550 million
Sustainable Growth Projects
Est. RM'm
1) 4 Water Concession 80 (on going)
2) Plantation (2100 ha) 52.4 (RM25/ha x 2,096ha - as per TA - fair value for young palm oil)
3) Mini Hydro 100 (2018/9)
4) Solar Plant 100 (still waiting for details, estimates)
Total 332.4m (average of EBITDA of RM50-60m)
(It is more appropriate to evaluate concessionaire projects using comparison of EV/EBITDA, normally initial year has higher PE of 12-18X)
Not forgetting JV for property development deal
1) Kwasa Land (LT) - estimate of RM700m
2) Puchong Land
At current EV (Market Cap less net cash) about RM590m, and EV/EBITDA of say about RM130m (as per TA) of 4.5X deemed low.
2017-01-13 17:46
COMPARISON
Scientex EBIT for FYE16 is 188:120 for Property:Manufacturing or about 60%:40%.
PAT is about RM232m and Market Cap is RM3,100m. PE is about 13.4x. (so how much PE should be given to manufacturing and property)
Investor don't seems to mind their property portion which grows faster than the manufacturing. In fact the property division has improved its ROE from 14% to 20%.
WHAT IS GADANG UP TO
Gadang investment of close to RM200-300m into utility/plantation/solar/hydro out of total shareholders fund of about RM550m is a good diversification into sustainable biz. And its natural transition part its biz from fully construction to property, makes more sense than a manufacturing going into property, because, property requires construction expertise, and it also improve ROE of the Company. I believe this is a great integration of biz, which using the expertise of engineering, construction and development (water, hydro, solar or plantation).
Isn't it how gradually IJM Corp, Gamuda and other big players started with 20-30 years ago?
2017-01-15 12:03
1. Gadang 1H results is not bad, about RM46m, consistent with management guidance of more than FYE2016
2. PE is traded on the around 7x (MCap is 670m), the lower band of 6-12x. Total cash is RM247m. Net cash RM67m.
3. Market perception (still negative on Gadang) because property contribute about 56%, while construction is 40%. However, the fact is, Gadang is going into property at "lower cost" - land provided by others,
1) Laman View
2) Puchong
3) Kwasa Land
4) Capital City (sunk cost of about 30m)
Total GDV of about RM3.5b to RM4.0b with Minimum "land costs & sunk cost" (most developer must have spent about RM300-400million to buy land for such GDV). Semenyih land is RM100m.
4. End of the day is the EXECUTION is crucial. There is no point having large GDV but unable to SELL. So, we have to evaluate Gadang property carefully if it is SALEABLE. So far, so good (as per management). Similarly, there is no point of having large construction order book if the cost overrun.
5. Moving towards utility is the right move, earnings can only be realised later.
6. Gadang is not well liked at the moment because everyone in town got the MRT2 project, except Gadang. "Kwasa Land" and "Puchong Land" contracts are property contracts, some investors don't like it.
7. As mentioned earlier, if we look at IJM Corp profits, do we actually know how much % are construction, property, toll roads, plantations (over the last 10-20 years), it evolved. At the moment, no one cares, it is trading at PE of 21x. IJM was once upon a time is like Gadang. It evolves.
2017-01-25 18:17
bro sosfinance , refer to latest report, capital city project still not likely start recognized profit by gadang in big way, right ?
2017-01-26 21:20
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Which analyst forecast RM100m net profit?
2017-01-12 00:04