The stock price has been increasing for more than 80% since last Dec'18.
Market has reckoned that Gadang would be benefited by the recent revival projects from the ECRL and the development of Bandar Malaysia.
For the current year to date, revenue increased to RM699.89 million from RM594.77 million in the
preceding year to date. Profit before tax decreased to RM71.02 million from RM132.10 million in the
preceding year to date. The lower profit for current quarter and year to date was mainly due to recognition of some variation orders for completed construction projects in the preceding year and the significantly lower profit reported for the Capital City project in the current year.
At here, the management does not mentioned clearly on the reason of causing lower profit recorded in this year.
Administrative expenses has reduced.
Administrative expenses and other expenses for the current year to date decreased by RM19.38 million as compared to the preceding year to date. This was mainly due to the following:-
- share option expenses for Employee’s Share Option Scheme decreased by RM3.58 million;
- one off impairment cost of RM10.49 million in relation to investment properties, inventories and
- other receivables in the preceding year; and
- unrealised loss on foreign exchange decreased by RM4.16 million.
Although operating costs has reduced, the cost of sales has increased by RM 184.435 mil or 46%. The growth margin has drastically reduced by almost half from 33% to 16%. It is a sign of making less profit with the revenue recorded.
Construction Division (Highlight)
The profit before tax decreased to RM0.13 million for the current quarter as compared to profit before tax RM14.35 million in the corresponding quarter of the preceding year. This was mainly due to lower profit margin reported for on-going projects.
The question to the management, how can the profit margin suddenly drop for so much in a single quarter? Man power supply issue? Material issue?
Mega construction projects have just revived mid of the year. We will foresee the major construction work will only start in second half year. Hence, it should be no big impact on material issue.
The only possible reason that I reckon would be caused lower profit margin would be Raya season with slower construction work on going.
Revenue for the current year to date increased to RM489.01 million as compared to RM378.13 million in the preceding year to date. However, profit before tax decreased to RM41.55 million in the current year to date as compared to RM82.72 million, mainly due to higher volume of variation orders recognised in the preceding year.
In short, Last year earn more than this year.
Property Division (Highlight)
Revenue for the current year to date decreased marginally to RM187.65 million as compared to RM193.83 million in the preceding year to date. However, profit before tax decreased to RM37.76 million as compared to RM66.96 million in the preceding year to date, arising from the significantly lower profit reported for the Capital City project in johor.
Company Prospect Highlight
Although construction division is having an outstanding order book at RM1.24 bil which enough for the division to busy for the next two years. However, with this kind of disappointing profit margin return, the order book is just enough to cover the division operating cost. The management should get new projects with higher profit margin to sustain the earning.
For property division, the management has intended to delay new launch development projects. Therefore, the profit margin will continue to be lesser as Capital city project.
The mini-hydro power plant construction work supposes to complete commission and start generating by this financial year, however, the project has been delay to the coming financial year.
Overall conclusion for fourth quarter report, it is a sell call for gadang in near term. Disappointing return is still remained as management doesn't provide a clear solution to improve the current situation.
