Oil breaks US$100, Wall Street retreats and bond yields rise, inflation is becoming the market’s biggest risk again Global markets are starting Thursday in a more defensive position. Brent crude has broken above US$100 a barrel , U.S. Treasury yields are pushing higher, and Wall Street fell for a third straight session as investors reassess whether central banks may need to keep tightening rather than easing. For Malaysian investors, the key chain today is increasingly clear: Oil → inflation → interest rates → bond yields → USD/MYR → Bursa valuations. 30-second market snapshot Market / Asset Latest 🇺🇸 S&P 500 7,636.36, -0.48% 🇺🇸 Dow Jones 52,380.66, -0.77% 🇺🇸 Nasdaq 26,253.34, -0.64% 🇲🇾 FBM KLCI 1,714.34, virtually flat 💵 USD/MYR ~4.06 🇺🇸 U.S. 10Y Treasury ~4.84% 🇺🇸 U.S. 2Y Treasury ~4.42% 🥇 Gold ~US$4,396/oz 🛢️ Brent crude US$101.21/bbl 🛢️ WTI crude US$96.05/bbl ₿ Bitcoin ~US$79,300 🇯🇵 Nikkei ~64,760, -0.6% this morning Brent jumped about 3.4% Wednesda...
Shares of Gadang Holdings Bhd (KL) saw a significant decline after TA Securities, the only research house covering the stock, downgraded the construction company to ‘sell’ following weaker-than-expected FY2024 results.
Key Points:
Stock Performance:
- Price Drop: Gadang's shares fell nearly 10% to 42.5 sen, marking the lowest since July 2. The stock closed at 43 sen, resulting in a market capitalization of RM313 million on Bursa Malaysia.
- Trading Volume: Trading volume was 18.97 million shares, more than triple the 20-day moving average.
Downgrade and Target Price:
- Downgrade: TA Securities downgraded Gadang to ‘sell’.
- Target Price: The target price was cut to 37 sen from 55 sen.
Financial Results:
- Core Net Profit: Excluding extraordinary gains of RM3.2 million, Gadang’s core net profit was RM1.5 million for FY2024, up 165.6% year-on-year but only 15.2% of the full-year estimate.
- Negative Variance: The shortfall was primarily due to higher-than-anticipated project operating costs and tax expenses.
Earnings Estimate Adjustments:
- Revised Estimates: TA Securities revised its FY2025/FY2026 earnings estimates downward by 21.6% and 35.8%, respectively, due to revised progress billing and margin assumptions and higher effective tax rate assumptions.
- FY2027 Forecast: Introduced an earnings estimate for FY2027, anticipating 16% growth.
Order Book and Sales:
- Order Book: As of end-May, Gadang’s construction order book stood at RM1.1 billion, equivalent to 4.1 times FY2024 construction revenue.
- Unbilled Property Sales: RM202.3 million, indicating a positive earnings outlook.
Division Outlook:
- Property Division: Expected to remain a key earnings contributor, supported by attractive sales incentives.
- Construction Division: Caution due to potential higher operating costs from project delays.
Conclusion:
Gadang's recent performance has been impacted by weaker-than-expected financial results, leading to a downgrade by TA Securities. The revised earnings estimates and lowered target price reflect the challenges faced by the company, particularly in managing project costs and tax expenses. Investors should monitor the progress of Gadang's construction projects and its ability to control costs while leveraging the positive outlook in its property division.
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