[Details of Gadang (9261) AGM 2019]
The company has three major businesses: construction business, real estate development business and Utility business.
The company's turnover of FY19 was RM 687.7 mil (FY18 RM 594.8 mil), an
increase of 16% year-on-year; while FY19's profit before tax was RM
71.7 mil (FY18 RM 134.1 mil), a year-on-year decrease of 47%, mainly due
to the majority of projects completion at FY18, and coupled with the
decline in profit margin of FY19 project.
The business that currently accounts for the largest proportion of
turnover is the construction business (70%), followed by the real estate
development business (27%), and finally the Utility business (3%).
✅ Construction business
-At present, the company's unfinished engineering order is about RM
1.14 bil, which is expected to keep the company operating for more than
two years.
✅Real estate development business
-Sales of real estate development business in FY18 reached RM 185.5
mil, FY 19 achieved RM 162.6 mil, and the company's sales target for
FY2020 is to reach RM 272.6 mil.
-The property development business (as of August 2019) also has
uncalculated sales of approximately RM 126.5 mil, which will gradually
translate into company turnover in the coming quarters.
-The company has planned but not launched projects in the future with a
total development value of about RM 2.5 bil. The launch date is not
confirm yet.
✅ Utility business
-The completion rate of the company's 9 Megawatt small hydropower plant
in Indonesia is 73% (as of August 2019), which is still within the
expected progress.
✅Management Outlook
Management is vigilant and optimistic about the revival of major infrastructure projects such as ECRL, Pan Borneo Highway and facilities in Malaysia.
Management is vigilant and optimistic about the revival of major infrastructure projects such as ECRL, Pan Borneo Highway and facilities in Malaysia.
The construction business will continue to bid for more infrastructure
contracts to increase the company's engineering orders. At the same
time, it will focus on executing ongoing projects to ensure that it can
be completed within the expected schedule.
The real estate development business will readjust newly launched real
estate development projects to meet market demand and expand its
customer base to promote sustainable growth.
As for the water treatment assets of the Utility business, it is
expected to continue to contribute sustainable revenue. The 9MW small
hydropower plant project in Indonesia is expected to be completed in the
next financial year, which will increase the sustainable revenue of the
Utility business.
Q&A:
✅ Q: Why are the variation orders for construction projects completed last year so high? Why are Capital City projects is low profitable?
A: The Variation order is so high because the customer requested to
rush work, which led to the completion of the project ahead of schedule.
As for the low profitability of the Capital City project, it is due to
the decline in market demand.
✅ Q: How will management respond to future cost management challenges?
A: The strategy we will implement when:
1. Timely reduce the number of employees who are extra when the project is completed to improve overall production efficiency.
2. Invest in technology applications to speed up project completion.
3. Maximize asset utilization to maximize project returns.
1. Timely reduce the number of employees who are extra when the project is completed to improve overall production efficiency.
2. Invest in technology applications to speed up project completion.
3. Maximize asset utilization to maximize project returns.
✅ Q: What is the occupancy rate of Elegan Residensi Phase 1?
A: As of October 31, 2019, 31% of sales have been confirmed.
✅ Q: What is the rate of return of the company's water concession in Indonesia?
A: Although the current water concession is already at the best
hydraulic capacity, the tariff rate will be adjusted according to the
local cost of living index, so the return rate will also be change. The
current rate of return is about 15%.
✅ Q:
Why does the company invest in DWL? As far as I know, now their stock
price has fallen and the company's investment is losing money.
A: This is a strategic investment. We can only bid for more
infrastructure projects by investing in DWL. At the same time, they also
have profit to share as a shareholder, it is a win-win situation, the
loss is just a temporary measurement.
Louis Yap
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