Central Global Bhd - Baby Steps To Recovery
Fri, 28-Feb-2025 07:30 am
by Team Coverage • Apex Research

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CGB (8052)

Target Price (RM)

1.000

Recommendation

Buy

Summary

  • CGB’s 4QFY25 core net profit at RM1.5m (turnaround from core net loss of -RM2.6m in previous corresponding quarter and +1,341.1% qoq) brings 12MFY25 core net profit to RM1.5m (-12.9% yoy) is deemed within expectations, despite only accounted to 15.0% of our full-year forecasted CNP of RM9.9m, in view of better earnings contribution from the construction segment in subsequent quarters.

  • Earnings sustainability will be supported by outstanding orderbook amounting to RM694.9m (6.7x against trailing-12-months construction revenue) that will provide earnings visibility over the till CY28, while cushioning the weakness from the manufacturing segment.

  • We re-iterate our BUY recommendation on CGB with unchanged TP of RM1.00, based on SOP valuations and ascribed with three-star ESG rating.

 

Results deemed within expectations. CGB’s reported core net profit in 12MFY25 at RM1.5m (-12.9% yoy) is deemed to be within expectations, despite only accounting to only 15.0% of our full-year core net profit forecast at RM9.9m. We project improvement to take place in subsequent quarters, driven by higher billings from Pan Borneo Highway Project which is still at initial stage of construction.

 

YoY. 4QFY25 core net profit (CNP) saw a turnaround vs core net loss of -RM2.6m (after stripping off one-off impairment on trade, other receivables and contract assets amounting to RM42.18 million in relations to Gerbang Bukit Kecil Project and Sungai Pinang Project) recorded in the previous corresponding quarter, mainly lifted by better contribution from the construction segment along with the cost rationalisation and cost containment measures. Revenue for the quarter, however, fell -5.2% yoy to RM43.0m. 

 

QoQ. Core net profit surged 1,341.1% qoq as construction works in Pan Borneo Highway project kicked-off, contributing to improved revenue from the construction segment. Revenue for the quarter improved +25.8% qoq.

 

Outlook. We expect core earnings to improve in upcoming quarters, backed by progessive recognition of unbilled order book amounting to RM694.9m (6.7x against trailing-12-months construction revenue) that will provide earnings visibility over the till CY28. Meanwhile, we foresee the manufacturing segment may remain in red as the segment is still in the midst of streamlining operational workflow.

 

Earnings Revision. No changes, given that reported results were deem in-line with in-house forecast.

 

Valuation. Re-iterate our BUY recommendation on CGB, with an unchanged target price of RM1.00 based on SOP valuations with the manufacturing segment EPS of 0.7 sen in FY26F pegged to P/E multiple of 18.0x, while the Construction segment’s FY26F EPS of 3.1 sen is pegged to P/E multiple of 28.0x and ascribed with three-star ESG rating.

 

Risk. Geopolitical tensions, labour shortages, insufficient industrial land, and unexpected further rise in construction cost.

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