This article first appeared in The Edge Financial Daily on January 23, 2020

KUALA LUMPUR: Gadang Holdings Bhd recorded a 36.3% fall in net profit for the second financial quarter (2Q) to RM10.85 million from RM17.03 million for the year-ago quarter, mainly due to fair value loss on quoted investments that amounted to RM3.2 million.

Besides that, earnings in its construction division contracted for the quarter ended Nov 30, 2019 (2QFY20), with profit before tax (PBT) dropping 26% to RM9.3 million from RM12.49 million, while utility division’s PBT fell 48% to RM1.48 million from RM2.83 million.

The decrease in 2QFY20 profit came despite a 17.3% rise in revenue to RM197.72 million from RM168.52 million, its stock exchange filing yesterday showed.

For the cumulative first six months of the financial year, Gadang’s net profit fell 23.5% to RM25.69 million from RM33.57 million for the previous year, although revenue grew 16% to RM345.32 million from RM297.66 million.

“This [earnings decline] was mainly due to fair value loss on quoted investment of RM5 million recorded as other expenses, and lower sales for property development projects,” Gadang said.

Gadang, noting the group is currently faced with uncertain economic headwinds but expects to remain profitable for the rest of FY20, said it is repositioning its business focus towards more sustainable activities to conserve its resources moving forward.

In particular, it said its construction business will leverage on securing large infrastructure contracts to boost order book, which currently has outstanding orders worth RM1 billion.

As for its property division, which is expected to remain sustainable with unbilled sales of RM123.5 million and encouraging sales from its townhouse project in Putra Perdana, Gadang will selectively promote new launches to match target market demand.

“The utility division continues to contribute a sustainable recurring income stream from the concession water treatment assets. The completion of the 9mw mini-hydro power plant, which is currently under construction in Lintau, Sumatera, will further strengthen the future recurring income stream for the group,” it added.

Gadang shares closed 0.5 sen or 0.72% lower at 68.5 sen yesterday, with a market capitalisation of RM498.72 million.