Investment Bank | TA SECURITIES |
---|---|
TP (Target Price) | RM0.25 (+25.0%) |
Last Traded | RM0.20 |
Recommendation |
The Gadang-JS Solar Consortium, comprising Gadang Holdings Berhad‘s wholly-owned subsidiary Gadang Engineering (M) Sdn Bhd (51% stake) and JS Solar Sdn Bhd (49% stake), has secured a significant Engineering, Procurement, Construction, and Commissioning (EPCC) contract worth RM52 million. The project involves the development of a 15MWac large-scale solar photovoltaic (LSSPV) power plant in Tawau, Sabah, with completion targeted by the fourth quarter of CY26.
This new contract significantly enhances the company’s financial position, pushing its current outstanding order book to approximately RM903.5 million. This figure represents 2.8 times its FY26F construction revenue forecast, providing substantial earnings visibility for the upcoming periods. Year-to-date, the company’s order book replenishment stands at RM144.5 million, accounting for 48.2% of its full-year replenishment assumption of RM300 million. The EPCC contract is estimated to contribute approximately RM1.3 million in effective net profit over its contract duration, based on an assumed project net margin of 5%. However, earnings forecasts for FY26F remain unchanged, as this new job win falls within the existing order book replenishment assumption.
Strategic Expansion into Renewables
The EPCC award marks a pivotal moment for the consortium as it represents their maiden win in the large-scale solar photovoltaic sector. This achievement provides a strategic entry point into the burgeoning renewable energy construction space. The company is poised to leverage its proven execution track record alongside its partner, JS Solar, a recently listed ACE Market player known for its articulated plans to pursue over 300MW of potential solar projects in Sabah. This partnership is seen as a crucial avenue for securing further project wins in the state’s growing renewable energy sector.
Financial Outlook and Challenges
Despite the healthy outstanding order book, the company maintains a cautious view on its earnings outlook. This stance is primarily due to persistent pressure on project margins, a trend attributed to intensifying competition within the construction sector and a project mix increasingly leaning towards lower-margin infrastructure jobs. Nevertheless, the company remains on track to achieve the balance of its FY26F replenishment target, supported by a robust tender pipeline valued at approximately RM3 billion, encompassing infrastructure, rail-related works, and data centre projects.
In light of these developments, investment bank TA Securities has issued a “BUY” recommendation for the company’s shares. The firm has set a target price of RM0.25, indicating a positive outlook for the stock’s performance.