TA SECURITIES
A MEMBER OF THE TA GROUP
Gadang Holdings Berhad
Solid Finish in FY25
Review
- Excluding exceptional items totalling RM12.7mn, GADANG’s adjusted core earnings for FY25 stood at RM23.4mn, broadly in line with expectations, accounting for 101.1% of our full-year forecast.
- YoY, revenue increased by 37.7% to RM803.7mn, mainly driven by higher progress billings from the construction division. In tandem with the topline growth and aided by a lower effective tax rate, adjusted net profit surged from RM3.1mn to RM23.4mn.
- QoQ, revenue in 4QFY25 declined 11.0%, attributed to slower revenue recognition from ongoing construction works. Consequently, core earnings dropped sharply by 58.6% to RM4.8mn, weighed down by elevated operating costs.
Impact
- No changes to our FY26-27F earnings estimates. Meanwhile, we introduce our FY28F projections, anticipating an earnings growth of 25.9%.
Outlook
- As of end-May 2025, GADANG’s outstanding construction order book stood at RM839mn, representing 1.8x FY25 construction revenue. Meanwhile, unbilled property sales amounted to RM297.2mn.
- Although the group secured no new contracts in FY25, we believe its near-term priority is to reinforce cost optimisation efforts and enhance profit margins. To support a more sustainable earnings trajectory, a disciplined cost management strategy must be implemented in tandem with active participation in selective tender opportunities.
- That said, we remain cautious on its job replenishment outlook. Considering the heightened competition intensity in the construction industry, we adopt a conservative assumption of RM300mn in new job wins per annum—reflective of the group’s historical track record, prevailing tender success rate, and current sector dynamics.
- Apart from that, we expect the property segment to remain a core earnings driver with new launches of Laman Citra Phase 4 at Gelang Patah, Johor Bahru (GDV: c.RM260mn) and Akasia Phase 1B at Semenyih, Selangor 9GDV: c.RM96mn), bolstered by aggressive pricing strategies and attractive sales incentives tailored to meet sustained housing demand.
Valuation
- We maintain our SOP-derived TP of RM0.22 and reiterate our Sell recommendation, premised on an unfavourable risk-reward profile.
TP: RM0.22 (-24.1%)
Last Traded: RM0.29
Sell
| Share Information | |
|---|---|
| Bloomberg Code | GADG MK |
| Stock Code | 9261 |
| Listing | Main Market |
| Share Cap (mn) | 800.9 |
| Market Cap (RMmn) | 232.2 |
| 52-wk Hi/Lo (RM) | 0.495/0.21 |
| 12-mth Avg Daily Vol (‘000 shrs) | 1,459.3 |
| Estimated Free Float (%) | 68.1 |
| Beta | 1.8 |
| Major Shareholders (%) | |
| Meloria Sdn Bhd | 12.1 |
| Sumber Raswira Sdn Bhd | 10.4 |
| Forecast Revision | FY26 | FY27 |
|---|---|---|
| Forecast Revision (%) | 0.0 | 0.0 |
| Net profit (RMm) | 15.0 | 13.0 |
| Consensus | – | – |
| TA’s / Consensus (%) | – | – |
| Previous Rating | Sell (Maintained) | |
| Consensus Target Price | – | |
| Financial Indicators | FY26 | FY27 |
|---|---|---|
| Net debt/equity (%) | (0.1) | (0.1) |
| CFPS (sen) | 8.9 | 6.6 |
| P/CFPS (x) | 3.3 | 4.4 |
| ROA (%) | 0.9 | 0.8 |
| NTA/Share (RM) | 0.8 | 0.7 |
| Price/ NTA (x) | 0.4 | 0.4 |
| Scorecard | % of FY | |
|---|---|---|
| vs TA | 101.1 | Within |
| vs Consensus | – | – |
| Share Performance (%) | GADANG | FBM KLCI |
|---|---|---|
| Price Change | ||
| 1 mth | 20.8 | 0.9 |
| 3 mth | 16.0 | 1.9 |
| 6 mth | (17.1) | (3.0) |
| 12 mth | (40.2) | (6.1) |
Table 1: Sum-of-Parts Valuation
| SOP valuation (RMmn) | Remark | |
|---|---|---|
| Construction | 92.4 | 16x CY26 net profit |
| Property | 29.8 | 8x CY26 net profit |
| Utilities | 36.3 | 8x CY26 net profit |
| TOTAL | 158.5 | |
| No of shares (mn) | 728.1 | |
| Equity value per share | 0.22 | |
| ESG premium: +3% | 0.01 | |
| Equity value per share | 0.22 |
Table 2: Earnings Summary
| FYE May (RMmn) | FY24 | FY25 | FY26F | FY27F | FY28F |
|---|---|---|---|---|---|
| Revenue | 583.6 | 803.7 | 539.5 | 463.8 | 508.1 |
| Gross profit | 76.7 | 74.9 | 86.3 | 74.2 | 81.3 |
| EBITDA | 43.1 | 36.3 | 38.4 | 32.8 | 38.5 |
| EBITDA margin (%) | 7.4 | 4.5 | 7.1 | 7.1 | 7.6 |
| EBIT | 26.2 | 19.7 | 28.7 | 26.0 | 30.8 |
| PBT | 14.5 | 18.0 | 23.1 | 20.3 | 25.1 |
| Core PBT | 10.6 | 30.7 | 23.1 | 20.3 | 25.1 |
| Net profit | 4.7 | 7.0 | 15.0 | 13.0 | 16.4 |
| Core net profit | 0.8 | 23.4 | 15.0 | 13.0 | 16.4 |
| Core EPS (sen) | 0.1 | 2.9 | 2.1 | 1.8 | 2.2 |
| PER (x) | 264.6 | 10.0 | 14.1 | 16.2 | 12.9 |
| Gross dividend (sen) | 0.0 | 0.3 | 1.0 | 1.0 | 2.0 |
| Dividend yield (%) | 0.0 | 0.9 | 3.4 | 3.4 | 6.9 |
| ROE (%) | 0.1 | 2.9 | 1.8 | 1.6 | 2.0 |
Table 3: FY25 Results Analysis
| FYE May (RMmn) | 4Q24 | 3Q25 | 4Q25 | QoQ (%) | YoY (%) | FY24 | FY25 | YoY (%) |
|---|---|---|---|---|---|---|---|---|
| Revenue | 150.5 | 252.6 | 224.9 | (11.0) | 49.4 | 583.6 | 803.7 | 37.7 |
| – Construction | 92.9 | 194.1 | 87.6 | (54.9) | (5.7) | 277.3 | 467.9 | 68.7 |
| – Property | 48.4 | 49.3 | 129.2 | N.M. | N.M. | 270.6 | 301.0 | 11.2 |
| – Utility | 9.2 | 9.1 | 8.1 | (11.4) | (12.4) | 35.6 | 34.8 | (2.3) |
| Cost of Sales | (135.0) | (224.5) | (220.4) | 1.8 | (63.3) | (506.9) | (728.8) | (43.8) |
| Gross profit | 15.5 | 28.1 | 4.4 | (84.2) | (71.4) | 76.7 | 74.9 | (2.4) |
| Operating profit | (2.3) | 10.2 | (10.6) | N.M. | N.M. | 26.2 | 19.7 | (24.8) |
| Finance Costs | (2.7) | (2.3) | (2.5) | (10.2) | 7.6 | (11.4) | (8.4) | 25.8 |
| PBT | (5.2) | 13.0 | (14.6) | N.M. | N.M. | 14.5 | 18.0 | 24.6 |
| Core PBT | (7.2) | 15.5 | 2.0 | (87.3) | 127.4 | 12.8 | 30.7 | 139.6 |
| – Construction | (6.9) | 10.1 | (8.3) | (182.3) | (20.9) | (23.7) | 6.3 | 126.6 |
| – Property | 6.1 | 6.3 | (0.9) | (114.7) | (115.1) | 50.0 | 24.9 | (50.2) |
| – Utility | 2.2 | 2.2 | 0.6 | (74.3) | (74.3) | 4.9 | 5.5 | 11.0 |
| – Investment | (6.5) | (5.6) | (5.9) | (4.7) | 10.4 | (16.8) | (18.6) | (10.8) |
| Income tax expense | (6.1) | (4.9) | 1.8 | 137.3 | 130.1 | (14.0) | (11.0) | 21.1 |
| Net profit | (9.4) | 9.1 | (11.7) | N.M. | (25.1) | 4.7 | 10.7 | 127.9 |
| Core net profit | (11.4) | 11.7 | 4.8 | (58.6) | 142.3 | 3.1 | 23.4 | N.M. |
| Reported EPS (sen) | (1.3) | 1.1 | (1.5) | N.M. | N.M. | 0.6 | 1.4 | 120.3 |
| Core EPS (sen) | (1.6) | 1.4 | 0.6 | (58.6) | 138.3 | 0.4 | 2.9 | N.M. |
| Dividend (sen) | 0.0 | 0.0 | 0.3 | N.M. | N.M. | 0.0 | 0.3 | N.M. |
| Margin (%): | % pts | % pts | % pts | |||||
| Core PBT | (4.8) | 6.2 | 0.9 | (5.3) | 5.7 | 2.2 | 3.8 | 1.6 |
| – Construction | (7.4) | 5.2 | (9.5) | (14.7) | (2.1) | (8.5) | 1.9 | 10.4 |
| – Property | 12.6 | 12.7 | (0.7) | (13.4) | (13.4) | 18.5 | 12.9 | (5.6) |
| – Utility | 23.3 | 23.5 | 6.8 | (16.7) | (16.4) | 13.8 | 13.1 | (0.7) |
| Core Net Profit | (7.6) | 4.6 | 2.1 | (2.5) | 9.7 | 0.5 | 2.9 | 2.4 |
| Effective tax rate | (117.4) | 37.8 | 12.5 | (25.2) | 129.9 | 96.6 | 61.2 | (35.4) |
Sector Recommendation Guideline
OVERWEIGHT: The total return of the sector, as per our coverage universe, exceeds 12%.
NEUTRAL: The total return of the sector, as per our coverage universe, is within the range of 7% to 12%.
UNDERWEIGHT: The total return of the sector, as per our coverage universe, is lower than 7%.
Stock Recommendation Guideline
BUY: Total return of the stock exceeds 12%.
HOLD: Total return of the stock is within the range of 7% to 12%.
SELL: Total return of the stock is lower than 7%.
Not Rated: The company is not under coverage. The report is for information only.
Total Return of the stock includes expected share price appreciation, adjustment for ESG rating and gross dividend. Gross dividend is excluded from total return if dividend discount model valuation is used to avoid double counting.
Total Return of the sector is market capitalisation weighted average of total return of the stocks in the sector.
ESG Scoring & Guideline
| Environmental | Social | Governance | Average | |
|---|---|---|---|---|
| Scoring | ★★★★☆ | ★★★★☆ | ★★★★☆ | ★★★★☆ |
| Remark | ISO 14001:2015, policies related to environmental management, waste management are in place. Recognition from KPKT for waste management at Cyberjaya hospital project. Green initiative included trees planting, installation of rooftop solar panel. | Maintained scholarship initiative, donations and giving back to community events. Winner of silver award for Employer of Choice (Private Sector) at 19th Malaysia International HR Awards 2019. | Both anti-bribery and whistleblowing policies are in place. The board is represented by 66.7% independent directors and 33.3% female director. |
| ★★★★★ (≥80%) | Displayed market leading capabilities in integrating ESG factors in all aspects of operations, management and future directions. | +5% premium to target price |
| ★★★★☆ (60-79%) | Above adequate integration of ESG factors into most aspects of operations, management and future directions. | +3% premium to target price |
| ★★★☆☆ (40-59%) | Adequate integration of ESG factors into operations, management and future directions. | No changes to target price |
| ★★☆☆☆ (20-39%) | Have some integration of ESG factors in operations and management but are insufficient. | -3% discount to target price |
| ★☆☆☆☆ (<20%) | Minimal or no integration of ESG factors in operations and management. | -5% discount to target price |
