I’ve made my 2nd purchase of the year after seeing 0198 GDB dropped to RM 0.80 from its peak at RM 1.08 in 22-Jan-2021. That’s a staggering 26% drop even after the pretty good 4th Quarterly Report. As a contrarian, I just can’t miss this chance to acquire more shares of this fast growing construction company.
“GDB Holdings Bhd is engaged in the provision of construction services, of residential, commercial and mixed development projects. The company is involved in the implementation of construction projects which includes daily management of all the works required for timely completion of the projects. It also engages subcontractors to provide certain services such as supply and installation of construction materials, machinery and equipment and other specialized trade work such as mechanical and electrical engineering works, piping and plumbing works, external paint works, water proofing works and other related work.” *taken from i3investor*
A little introduction on GDB Berhad: GDB was founded in 2013 by the current Managing Director Mr. Cheah Ham Cheia (38 years of experience) and Executive Director Mr. Alexandre Lo (25 years of experience), both of them were former top management from Putra Perdana Group. The company was listed in September 2017 on the ACE Market, before being transferred to the Main Board in April 2020. In October 2019, GDB acquired 70% stake of GDB Geotechnics Sdn. Bhd. (previously known as Eco Geotechnics Sdn. Bhd.) which engaged in the provision of construction services specializing in geotechnical and foundation engineering works. This acquisition helped to propel GDB into a complete construction company.
Over the years, GDB has built a very good relationship with Hap Seng Consolidated Berhad and Park City Group (developer for the famous Desa Park City), being awarded a few contracts by these two companies. You can find out the current and past projects from the link here. Completed projects: https://www.gdbhb.com.my/portfolio-projetcs/completed-projects/
Current projects: https://www.gdbhb.com.my/portfolio-projetcs/on-going-projects/
GDB has made a name for themselves for being always be able to complete a project ahead of schedule. This implies that the management team is very capable in project management, which directly leads to cost saving, hence higher profit margin. Furthermore, GDB uses the BIM (Building Information Modelling) technology, an intelligent 3D model-based software that gives architecture, engineering, and construction (AEC) professionals the insight and tools to more efficiently plan, design, construct, and manage buildings and infrastructure. This showed that the management emphasizes heavily in efficient project execution.
I’ve been holding GDB since January 2020. Along the way I topped up twice, once during the big dip in March 2020 and then another time in August 2020. As usual, I always look to buy shares when the share price temporary dropped drastically due to market sentiment or reasons that are not affecting the company’s fundamentals. In this case, I first bought GDB in January 2020 at RM 0.595 because the share price dropped from the previous peak of RM 0.795 (-25%) even after GDB successfully won four contracts with a total contract value of RM 818.87 million in the period of less than 3 months (from September 2019 – November 2019). This amount is almost 3x its FY2018 revenue of RM 274.6 million. Then come March 2020, where our share market dropped to an extremely low level. I smelled a very good opportunity to bite at RM 0.460 after it recovered from the lowest RM 0.355 on the faithful 19-March-2020. I bought again at RM 0.550 on 11-Aug-2020 after it again dropped from the previous peak of RM 0.640 (-14% drop).
For their past financial performance, the graph above showed that GDB managed to record pretty good growth since its listing in 2017. FY2020 was a tough year for construction section due to the various MCO, CMCO, etc. and the compliance to strict SOP to prevent COVID-19 had increase the cost of construction. Nevertheless, GDB still record a slightly higher revenue, albeit a slightly lower net profit. Profit margin improved considerably in FY2019 but dropped in FY2020, mainly due to COVID-19.
As for their balance sheet, GDB has been a debt free company since its listing, currently holding a cash equivalent + short term investment (money market fund as stated in their FY2019 annual report) of RM 81.76 million, a 6.6% increase compared to the previous year at RM76.69 million. That’s equivalent to approximately RM 0.131 of cash per share.
Cash flow looks good too, as the company managed to have a positive cash inflow of RM 7.49 million even in the dreadful FY2020 as many companies were facing financial difficulties and forced to implement pay-cut or retrenchment.
In November 2020, GDB successfully won a 34-months contract to complete the prestigious 8 Conlay development, with a massive contract sum of RM 1.25 billion, plus a provisional sum of RM 15.8 million for stage performance incentive. This job not only is GDB’s biggest contract ever, it’s also one of the major property development contracts in 2020.
The followings are the reasons why I decided to further invest in GDB:
1. Continuous growth in revenue and net profit from 2015-2020, with a relatively high ROE
Revenue grew 114% in 5 years, averaging 22.8% per year, net profit grew 256.9%, averaging 51.4%. Profit margin is improving but FY2020 was hindered by COVID-19. Compared to similar companies like 7161 Kerjaya (consistently over 10%), there is room for improvement for GDB in terms of profit margin. ROE is consistently high, averaging 23.88% from 2018-2020.
2. Strong Order Book with low Forward PER, provides earnings visibility for the next 2-3 years. As of 31 December 2020, GDB’s outstanding order book stood at RM 2.06 billion, which is 5.67x its FY2020 revenue. If we spread this order book into 2.5 years, each year will have an average revenue of RM 824 million. With a conservative profit margin of 7%, this will translate to a net profit of RM 57.7 million, which is approx. 9.23 cent EPS. Based on a modest 11.5x forward PER (Hong Leong Investment Bank gave a 13x PER ex-cash to GDB, link https://cdn1.i3investor.com/my/files/st88k/0198_GDB/pt/HLG/0198_GDB_HLG_2021-03-08_BUY_1.32_GDBHoldingsStrongTopline_-272833592.pdf ), the share price should be RM 1.06. A potential 32.5% gain at RM 0.80 entry. Besides, at the current price of RM 0.80, this translates to a Forward PER of 80/9.23 = 8.67x. (7161 Kerjaya’s Forward PER 13x given by Kenanga, link https://cdn1.i3investor.com/my/files/st88k/7161_KERJAYA/pt/KENANGA/7161_KERJAYA_KENANGA_2021-02-26_BUY_1.50_KerjayaProspekGroupFY20WithinExpectations_1543571607.pdf )
3. Fast growing small cap construction company with a strong management team. With the 8 Conlay job and the 4 jobs secured in late 2019, GDB’s performance will continue to grow in the next few years. There are plenty of upsides for GDB given their current size (market cap at RM 500 million as 1-April-2021). As demonstrated by their past history of completing projects ahead of schedule, GDB has a very strong and experienced management team in Mr. Cheah and Mr. Alexandre Lo, both have a combined 63 years of experience in the construction industry. I believe the management will continue to grow the company and create values for the shareholder.
4. Share price has dropped from the high at RM 1.08 to RM 0.80 (-25.93%) even though it recorded strong order book in FY2019 and FY2020. I see this as a very good opportunity to accumulate GDB’s share at the current Forward PER at 8-ish level.
5. Consistent dividend pay-out. Current DPS at 2.0 cent, DY at 2.5%. If the profit increase as per the above, expected DPS in FY2021 to be at 4.5 cent (approx. 50% pay-out ratio). This will translate to a DY of 5.625%.
6. Solid balance sheet with net cash positions plus zero debt, and healthy cash flow.
The following concerns I had with GDB:
1. Order book replenishment below expectation
2. Rising construction material price and stricter COVID-19 SOP which may affect the profit margin
Conclusion: I think there are plenty of upsides with limited downsides, with the only real concern is their ability to replenish their order book. However, given their past records, I’m rather confident that GDB will be able to at least meet the expected RM 400 million order book replenishment in FY2021 as guided by the management.
The low Future PER also one of the key reasons that I topped up. Furthermore, due to a recent sell down, I believe the entry at RM 0.80, F-PER of 8.67x is very attractive, because I think GDB deserves PER 11.5x at least. I will further monitor the share price and will definitely accumulate more should the share price slump further. Disclaimer: This is a personal opinion recorded for my personal record. Nothing on this Blog constitutes investment advice, performance data or any recommendation that any security, portfolio of securities, investment product, transaction or investment strategy is suitable for any specific person. The author shall not be held accountable for any investment decision made by the reader. Invest at your own risk.
在看到0198 GDB从2021年1月22日的最高RM 1.08跌至RM 0.80后，我做出今年的第二次买入。即使在发布了相当不错的第四季度报告之后，其股价仍从高点下跌了惊人的26％至RM 0.80。作为一名反向投资者，我知道不能错过这次买入这家正快速发展的建筑公司的机会。
“GDB Holdings Bhd从事住宅，商业和混合开发项目的建筑服务。该公司主要参与建设项目的实施，其中包括对及时完成项目所需的所有工程的日常管理。它还聘请分包商提供某些服务，例如建筑材料，机械和设备的供应和安装以及其他专门的贸易工作，例如机电工程，管道和管道工程，外部油漆工程，防水工程和其他相关工作.” *摘自i3investor*
GDB Berhad的简介：GDB由现任MD Cheah Ham Cheia先生（有38年经验）和ED Alexandre Lo先生（有25年经验）于2013年成立，他们俩之前都是Putra Perdana Group的高层。GDB于2017年9月在ACE市场上市，然后于2020年4月转移到主板。在2019年10月，GDB收购了从事建筑服务，专门从事岩土工程和地基工程的GDB Geotechnics Sdn. Bhd. 70％的股份（前身为Eco Geotechnics Sdn. Bhd.）。这项收购让GDB成为一家更加完善的建筑公司。
过去这几年，GDB与Hap Seng Consolidated Berhad和Park City Group（著名的Desa Park City的发展商）建立了良好的关系，并从这两家公司获得了一些工程。您可以从一下的链接中找到GDB进行中和已完成的工程。 已完成的工程: https://www.gdbhb.com.my/portfolio-projetcs/completed-projects/
GDB因为总是能够提前完成工程而闻名。这意味着管理层在工程管理方面非常有能力，而这项能力能够帮助节省成本，从而提高利润率。此外，GDB善用BIM技术，一种依据3D模型的智能软件，可为工程和建筑（AEC）专业人员提供各种工具以更有效地规划，设计，建造和管理建筑物及基础设施。这显示管理层非常注重高效率的工程管理与执行。
我从2020年一月开始就持有GDB。一路上我总共加码了两次，一次在2020年三月，另外一次于同年八月。就像我一贯的作法，我总是在一只股票因为市场情绪或不影响公司基本面的原因而下跌的时候寻找买入的机会。我第一次在2020年一月份以RM 0.595买入GDB是因为其股价从之前RM 0.795的高峰下跌了25%，即使GDB在短短的三个月内（2019年九月份至十一月份）赢得了四项总值RM 8.189亿的工程。这四项工程的总值几乎是其2018财年总营业额（RM2.746亿）的3倍。然后去年三月，我们大马的股市因为新冠疫情跌到了一个极低的水平。那是我觉得这是一个买入的大好机会，于是便在当它从最低的RM 0.355稍微反弹至RM 0.460的时候加码。我在同年八月份以RM 0.555再次买入，因为它又从之前的RM 0.640下跌了14%。
就GDB的财务表现，上表显示GDB自从2017年上市以来一直保持相当不错的成长。2020财年对建筑行业来说是困难重重的一年，因为各种行管令和标准作业程序会直接增加建筑成本。然而，GDB的营业额依然比去年稍微上升，尽管其净利稍微下滑了一点。其利润率在2019财年上升至相当不错的水平，可惜2020财年因为疫情的缘故利润率又下降了一点点。
至于资产负责方面，GDB打从上市以来一直都是零借贷的公司，现在手持的现金和短期投资（根据2019财报，这些短期投资都是投资于货币市场基金）高达RM 8,176万，比去年的RM 7,669万上升了6.6%，也相等于RM 0.131的每股现金。
现金流方面也相当不错，在许多公司都面临财务问题而被逼减薪或裁员的2020财年还录得RM 749万的正现金流。
2020年十一月，GDB成功标得一项为期34个月，价值RM12.5亿外加RM 1,580万的阶段绩效激励，接手完成万众瞩目的8 Conlay发展项目。此工程不只是GDB迄今为止所赢得价值最大的工程，也是2020年其中一项主要的房地产发展工程。
以下是我决定进加码投资GDB的原因：
1. 营业额和净利从2015至2020年持续地增长，以及相当高的股本回酬率
营业额在五年内增长了114%，平均每年增长22.8%；净利则激增256.9%，平均每年上升51.4%。利润率虽然有所提升但是2020财年却遇上了新冠病毒。利润率相较于同行的7161 Kerjaya（常年高于10%），GDB确实还有上升的空间。
2. 强劲的工程订单与偏低的预期PER，有至少2-3年的盈利保证。截至2020年12月31日，GDB的未完成订单高达RM 20亿，相等于其2020财年营业额的5.67倍。若以2.5年计算，平均一年的营业额高达RM 8.24亿。以7%的利润率来保守估计，其净利将达到一年RM5,770万，相等于大约9.23 cent的每股收益。以11.5x的预期PER （Hong Leong Investment Bank给与GDB 13x PER，链接https://cdn1.i3investor.com/my/files/st88k/0198_GDB/pt/HLG/0198_GDB_HLG_2021-03-08_BUY_1.32_GDBHoldingsStrongTopline_-272833592.pdf )，其股价应该在RM 1.06。以RM 0.80的价格计算，潜在收益高达32.5%。除此之外，现在RM 0.80的股价相等于 80/9.23 = 8.67x的预期PER. （Kenanga给予7161 Kerjaya 13x的预期PER，链接
3. 拥有强劲管理层的高成长小型建筑股。在赢得8 Conlay项目以及2019年尾那4项工程后，GDB的业绩应该会在接下来的几年持续成长。从目前公司的规模来看，GDB有很多上行空间（市值在2021年4月1日为RM 5亿）。从过往成功提前完成工程的表现来看，以Cheah和Lo Alexandre这两位在建筑业中共拥有63年的经验为首的管理团队是相当的强大而且经验丰富。我相信管理层将继续公司的发展努力并持续地为股东创造价值。
4. 即使在2019和2020财年都赢得强劲的工程订单，GDB的股价依然从RM 1.08的高点下滑了25.93%至RM 0.80。我个人认为这是一个非常好的入场或加码机会，可以于预期PER大约8x的水平累计GDB的股票。
5. 稳定的股息派发。当前每股派息为2.0c，股息率为2.5％。如果净利如上增长，预计每股派息会在2021财年增至4.5c （派息率大约50%）。那么预期的股息率就是5.625%。
6. 稳健的资产负债表，净现金，零负债，还有健康的现金流。
我对GDB的担忧有以下几点：
1. 工程订单量不如预期
2. 建筑材料的价格上涨以及更严谨的新冠病毒标准作业程序将影响利润率
总结：我认为GDB拥有很多上行空间，但下行空间却有限。唯一真正担忧的至是他们补充工程订单的能力。但是，鉴于他们过去的记录，我非常有信心GDB能在2021财年达到管理层所预期的RM 4亿订单。
其极低的预期PER也是我加码的其中一个重要因素。而且经过最近一轮的大幅回调，我认为RM 0.80，预期PER 8.67x是一个非常吸引人的价位，因为个人认为GDB至少应该有 PER 11.5x。我将继续观察股价，并在股价进一步下跌时积累更多股票。
免责声明：这只是个人意见，记录下来供我个人使用。此博客上的任何内容均不构成投资建议，绩效数据或任何建议，任何证券，证券组合，投资产品，交易或投资策略均适合任何特定人士的建议。作者对读者做出的任何投资决定概不负责。投资风险自负。
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