Hot Stock Gadang climbs 6% after securing RM375m Petronas job

by **Cals** Tue 27 Oct 2015, 00:20

Hot Stock

[size=28]Gadang climbs 6% after securing RM375m Petronas job

By Ahmad Naqib Idris / theedgemarkets.com | October 26, 2015 : 12:20 PM MYT

KUALA LUMPUR (Oct 26): Gadang Holdings Bhd ([You must be registered and logged in to see this image.] Valuation: 3.00, Fundamental: 1.70) rose as much as 6.2% during mid-morning trade, following news that the group had secured a RM375.13 million construction project from Petroliam Nasional Bhd (Petronas).

At 11.47am, Gadang rose four sen or 2.7% to RM1.50, with some 3.4 million shares exchanged. Earlier, the counter gained as much as nine sen or 6.2% to reach a high of RM1.55.

In an announcement Friday (Oct 23), Gadang said the contract involves infrastructure work in Pengerang, Johor, which is also the location of Petronas' refinery and petrochemical integrated development (RAPID).

The contract was for a period of 31 months, which will contribute positively to Gadang's earnings for the financial year ending May 31, 2016 (FY16).

In a note today, JF Apex Securities viewed the contract win positively, as the value of the contract had exceeded the research house's expected new FY16 orderbook of RM300 million.

"We are positive for this contract as it is expected to contribute RM20.6 million net earnings to the group stretching from FY16 to FY18 based on 5.5% net margin. As of to date, the current outstanding orderbook for Gadang stands at RM634.15 million which sustains its revenues visibility over 1 year or 1.07 times of FY15 revenue," it said.

JF Apex believes that Gadang will be able to achieve higher efficiency in carrying out the project, as mechanical and electrical workforce have already been deployed in Pengerang due to its previous jobs there, coupled with the group's past working experience in Pengerang.

"Furthermore, the commencement of this newly awarded job is just timely as construction progress for the previous jobs mentioned above are tapering off in September 2015," it said.

The research house revised up its revenue forecast for FY16 and FY17 by 4% and 18% respectively.

It maintained "buy" on Gadang with an unchanged target price of RM1.98, and said that the current share price of the stock is undervalued.

(Note: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)

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