Wednesday, January 13, 2010

Update On Gadang Holdings

Posted a couple of years ago, Gadang Holdings. (Wonder what happen to those folks?) LOL! It has been way too long and that the blog posting was a mere rebroadcast or reflection a forum posting made here at Sahamas.

Last night Gadang Holdings, through a joint venture, won the MAHB contract worth some rm 291 million. (LOL! The cynic would ask who is this BJQ? Without them, would Gadang won the contract? Does Gadang even have the know how?)

  • Gadang and JV partner clinch MAHB contract
    Written by Lam Jian Wyn
    Wednesday, 13 January 2010 00:28

    KUALA LUMPUR: Gadang Engineering (Malaysia) Sdn Bhd and its joint-venture (JV) partner Bukit Jerneh Quarry Sdn Bhd have received a letter of acceptance for a contract worth RM291.18 million from Malaysia Airports Holdings Bhd (MAHB).

    The contract pertains to a works package under the proposed development of the new low-cost carrier terminal and related works at the Kuala Lumpur International Airport (KLIA), Gadang Engineering's parent company GADANG HOLDINGS BHD [] announced to Bursa Malaysia yesterday.

    "The scope of works under the contract comprises site preparation, earthworks and main drainage for Runway 3 and its associated taxiways which are expected to be completed on Dec 18, 2010," it said.

    The contract was awarded to the Gadang-Bukit Jerneh Quarry JV in the proportion of 70:30 respectively.

    Gadang Holdings expects the contract to have a positive impact on its earnings and net assets for the financial years ending May 31, 2010 and 2011.

Obviously, if one had been tracking this stock, one would have noted that the stock has have an extremely impressive run lately and needless to say, one would probably ask if this news had already been baked into the stock.

Ah... that I always do not know and in case you do not notice, I am more interested in the companies than the stock and in case you do not know, for me, any given stock do have a chance to go up or down at any given day. That much I do know about stock prices. :P

Well the first thing I had asked myself was how did Gadang fared since I wrote that simple stock review at Sahamas.

Not too good I am afraid.

In that posting, I made the following table, which highlighted Gadang's earnings performance.

Let me show you how Gadang has fared since 2007. I have highlighted the rows in yellow.

As you can see Gadang's earnings had been dismal. It fared terribly in 2008 and 2009.

Ah, of course, some would argue that the dismal performance is not unexpected, especially since those were not the best of times.

True but in regardless, it does reflect why the weak stock performance since 2007.

But the stock had done rather well towards the end of last year.

Were there not any justifications?

Well here's Gadang's last reported quarterly earnings announced on Oct 2009.

Quarterly rpt on consolidated results for the financial period ended 31/8/2009

And if I update on a simple table form, this is what I would be seeing.

It's revenue dropped but its earnings improved to an impressive 3.852 million and if one would look at its cash flow statement, there's much improvement. However, as mentioned back in 2007, Gadang's receivables are still rather high (its balance sheet showed receivables at some 120 million).

So with Gadang winning the MAHB contract worth some 291 million, perhaps many would be optimistic. Well, they
could start cranking some numbers and going through the what if scenarios.

For example.

Contract worth 291 million. If and if, Gadang could get a 6% margin from this job, then Gadang's 'potential' profits could be some 17.5 million and since this is a 70:30 jv, then Gadang's share of profit from this venture could be worth some 12.2 million.

Now 12.2 million profits is actually not much but for a company's the size of Gadang, such earnings is really substantial.

But then the cynics might ask, could Gadang deliver?

ps: oh... I really do not know how Gadang the stock would perform in the future. Ok? So please do spare me. :D


solomon said...

Gadang strike my attention more of the owner as a well-known investor in Green Packet. Whether the current stock price factored in the RM300 million job, it might have some relations with the other run up in Green Packet.

Unless there is a broad rally in Tier 2 contractor, I will save my chips. It is not in my conviction buy list. How abt you Moolah?

Moolah said...

Errr............ :D