Gadang eyes Sarawak projects as state funding increases

This article first appeared in The Edge Financial Daily, on November 8, 2018.
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KUALA LUMPUR: Construction engineering firm Gadang Holdings Bhd is eyeing a slice of the record RM12 billion accorded to the state under the recently tabled Budget 2019.

Of the total, RM9.073 billion — including a federal fund of RM260 million — was allocated for development expenditure, and RM2.841 billion for operating expenditure.

“There are a lot of opportunities for us (going forward),” construction division managing director Khew Check Kiet said after the group’s annual general meeting yesterday.

Currently, the group has bid for about RM2 billion worth of projects, including the four packages in the Pan Borneo Expressway project, as well as the MARA Science College in Sabah. Its order book now stands at RM1.5 billion.

Even so, Khew said the sector is expected to remain challenging in the short term as Putrajaya is reviewing ongoing infrastructure projects in an attempt to manage the nation’s huge fiscal deficit.

However, he believes that the things may perk up next year following the budget announcements.

“As long as the government continues to roll out infrastructure projects, there will [be] some chances for us,” he said, pointing to hospital contracts in particular as healthcare was a priority in budget 2019, with some RM29 billion allocated, which is 7.8% more than last year.

On the MRT Sungai Buloh-Serdang-Putrajaya line (MRT2), Khew said Gadang has not been informed about any reduction in the value of its RM952 million viaduct work package, and does not expect to be affected by cost-cutting measures.

Last month, MMC-Gamuda KV MRT (T) Sdn Bhd agreed to a bigger cost cut of RM3.6 billion or 21.5% to reduce the construction cost for underground works to RM13.11 billion.

On the property front, Gadang has set a higher target of RM250 million sales in FY19 driven by projects The Vyne, Laman View, Putra Perdana, Capital City, Semenyih and Pokok Sena, and include new launches with a combined gross development value of RM392 million.

Despite the challenging outlook, managing director of property division Datuk Ling Hock Hing said the response for landed homes in strategic locations has been positive.

Moreover, first-time housebuyers of properties worth up to RM500,000 will not have to pay stamp duty on the first RM300,000 under Budget 2019.

The group’s unbilled sales stood at RM106.5 million as at Aug 31, 2018. It has approximately 310 acres (125ha) of undeveloped land with a remaining gross development value of some RM2.9 billion which Khew said could support the division’s earnings growth for the next 10 years.

Gadang yesterday closed one sen or 1.59% higher to 64 sen, valuing the group at RM423.5 million.