GFM Services Berhad (GFM) 0039
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GFM was listed on the Ace Market of Bursa Malaysia on Jan 9, 2017 following a long-delayed reverse takeover (RTO) of Asia EP Resources Berhad. GFM is an investment holding company, with various subsidiaries like Global Facilities Management Sdn Bhd (GFMSB), GFM Solutions Sdn Bhd (GFMS), Everfine FMS Sdn bhd (EFMS) and the recent acquisition, KP Mukah Sdn Bhd (KPMD).
Through GFMSB, GFMS and EFMS, the Group provides integrated facilities management and consulting services like civil and structure services, mechanical and electrical equipment, heating ventilation air-conditioning (HVAC) system, fire detection & fighting system, wastewater treatment system and plumbing system, CMMS and many more to the private and government sectors.
Besides, the group also obtained international management certification in 2015:
1. ISO 9001:2015 (Quality Management System) Provision of Facility Management and Maintenance Services
2. ISO 18001:2007 (Occupational Health & Services) Provision of Facility Management and Maintenance Services
3. ISO 14001:2015 (Environmental Management System) Provision of Facility Management and Maintenance Services
The requirements for all these international certifications in facilities and services management certification are very harsh and to be recognised by relevant institutions, company have to show and prove their professionalism in relevant fields.
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Financial Performance and Financial Position
GFM’s financial performance will be analysed starting from FY2017 as it was listed in Jan 2017 following an RTO of Asia EP Resources.
FY 2017 Performance:
Revenue: RM 104.47 million
Net profit: RM 9.98 million
FY 2018 Performance:
Revenue: RM 123.09 million
Net profit: 7.63 million
FY 2017 vs FY 2018 Performance Review:
GFM’s revenue in FY 2018 is 17.82% or RM 18.62 million higher than FY 2017, However its net profit in FY 2018 recorded a RM 2.35 million lesser compared to FY 2017.
In fact, GFM’s revenue in FY 2018 actually recorded a new high at RM 13.5 million as a one-off expense of RM 5.9 million was incurred for the acquisition of KPMD.
Financial Position
Cash: RM 99.6 million
Short term debt: RM 25.79 million
Long term debt: RM 351.74 million
Despite the group is in net debt position, but the group’s cash is 3 times higher than its short-term debt. Moreover, the group’s cash flow from operating activities is positive. By comparing the balance sheet and cash flow with its competitors, AWC and UEM Edgenta, GFM looks relatively healthier and attractive.
During FY 2018, GFM had performed private placement to raise RM 18.9 million of cash and majority of it was spent on the acquisition of KP Mukah Sdn Bhd. In addition, the group had also issued RM 165 million Islamic notes (Sukuk) to finance its investment activities, capital expenditure, working capital requirements and other general corporate purposes, including repayment of any financing facilities.
The group also have a 40% dividend policy, whereby every 10 cents of profit per share they made, they will return 4 cents to shareholders.
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Future Prospects
The group had awarded 3 contracts which worth RM 91.66 million in total in FY 2018 from Sabah State Administration Centre (RM 51.8 million), Johor Iskandar (RM 6.46 million) and Perkeso (RM 33.4 million). Moving forward, as on Q1 2019, the group also awarded 2 contract which worth RM 69 million in total from Bank Negara Malaysia.
Moreover, the recent acquisition of university asset concessionaire, KPMD from Kumpulan Parabena Sdn Bhd for RM 122.5 million holds a 23-year concession awarded by the government and Universiti Teknologi Mara (UiTM). The strategic acquisition of KPMD would allow GFM to move up the value chain and widen its scope from being a facilities management services provider into a full-scale build, lease, maintain and transfer concession holder.
The addition of KPMD’s estimated outstanding order book of RM1.2 billion will further boost GFM’s order book of RM281.2 million to hit RM 1.5 billion. The group also will be entitled to KPMD’s recurring future earnings for the remaining 16 years and it also improves the group’s long-term earnings visibility. The Managing Director also states that KPMD’s net profit is double of what GFM currently is making.
On top of that, GFM has a 100% contract renewal and extension rate as the Ace-listed company successfully renewed nine out of nine contracts that were up for renewal last year. In terms of tenders, the group currently has a tender book worth RM 700 million, with a success rate of about 14% as at Dec 31, 2018.
GFM is currently involved in the pre-construction phase of the Bukit Bintang City Centre (BBCC) for the provision of preliminary facilities management consultancy services. The managing director also noted that, they are well positioned to gain competitive advantage in securing the subsequent full-scale contract for the such services for BBCC once construction is completed. BBCC is joint-venture development by the Employees Provident Fund, Eco World Development Group Bhd and UDA Holdings Bhd. The mixed residential and commercial development is situated on a 19.4-acre former Pudu Prison site in KL, with a total gross build-up area of 6.7 million sq ft and a gross development value of RM 8.7 billion.
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Industry/ Sector outlook
The integrated facilities management market has experienced good growth over the past five years, despite a decline in scale due to unfavourable negative sentiment in the overall economy, with a compound annual growth rate (CAGR) of 7.91% between 2013 and 2017. Integrated facilities management services are widely and getting more demand as it not only improves efficiency, reduces the excessive and unnecessary costs associated with inefficient facility maintenance processes, but also enables the flexibility and scalability from the human resources within the support department. With the increased awareness of the benefits of integrated facility management, the prospects for market participants are improving. In Malaysia, Frost & Sullivan estimates that revenue from the local integrated facilities management market will increase from RM4.79 billion in 2017 to RM7.43 billion in 2022, with a CAGR of 9.17%. The projected increase in demand is expected to be driven by various factors.
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Financial projection
As of 20/4/2019, The Group worth RM 243 mil or RM 0.515 per share with 1.62 cents of earning per share and P/E 31.8. With the acquisition of KPMD, it will greatly enhance the group’s ability to make money. In the announcement (KPMD acquisition proposal), the Group’s EPS after the completion of the acquisition can be greatly increased to 5.45 cents.
2018 Q4 performance will only be included one month of contribution from KPMD as the acquisition is completed on end Nov 2018. Without any unforeseen events occur, we might see performance for FY 2019 will be even stronger. Let’s say, KPMD can generate profits as what projected, I believe that GFM’s net profit for FY2019 will hit RM 28 million or which equivalent to EPS of 5.96 cents and P/E 8.68. In near term, GFM also will be transferred to main market which they had proposed, and this also will lead to more funds coming in.
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Technical Analysis
Share price trading above 200 days moving average with short term uptrend still intact. Resistance level - RM 0.55 and Support level - RM 0.475/0.48. Any breakout from RM 0.55 with volume will bring GFM to test RM 0.60, RM 0.70, RM 0.775 or even new high. (But, of course must be supported by its financial results)
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Disclaimer
I am holding 110,000 units of its warrants with an average price of 16 cents. So, please do your own due diligence. Furthermore, my analysis is purely for educational and learning purpose, it does not induce any intention to purchase or sell. Further action or execution shall be consulted via experts. Trade at your own risk.
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End.
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