Stock With Momentum: Gadang Holdings

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This article first appeared in The Edge Financial Daily, on October 27, 2015.

Gadang Holdings Bhd (+ve)

Shares of Gadang (Fundamental: 1.7/3, Valuation: 3/3) rose as much as 6.2% in early trading yesterday, before closing up 2.7% at RM1.50. This came after it clinched a RM375.13 million construction contract from Petronas.

The contract, commencing October 20 for a period of 31 months, involves infrastructure works in Pengerang, Johor — the site of Petronas’ refinery and petrochemical integrated development (RAPID) project.

Gadang is mainly engaged in civil engineering works and property development. The construction division accounted for 76.5% of sales in FYMay2015, followed by property development (20.4%), and water utilities and plantation divisions (3.1%). At end-May, the company had net cash of RM39.7 million, or about 12% of its market capitalisation.

For FY2015, net profit expanded an outsized 37.9% to RM59.6 million on the back of a 7.8% increase in revenue to RM587.4 million. The increase was attributed to higher contributions from the construction and property development divisions.