Sunday 21 Jul 2024
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This article first appeared in The Edge Malaysia Weekly on April 15, 2024 - April 21, 2024

CONSTRUCTION firm GDB Holdings Bhd — which has been embroiled in disputes with KSK Group in the last two years over the development of the 8 Conlay project in Kuala Lumpur — appears to be back on investors’ radar, judging by the recent upward trend in its share price.

According to market sources, GDB is close to securing a sizeable contract from a Singapore-headquartered real estate investment trust (REIT) manager to build a warehouse in Shah Alam, Selangor.

It is also understood that GDB is bidding for a resort hotel project in Kota Kinabalu, Sabah, as well as a new condominium project in Mont Kiara, Kuala Lumpur.

“GDB has a good chance to secure another two to three new major contracts this year. Conservatively estimated, each contract is expected to carry a value ranging between RM500 million and RM600 million,” says a source.

When contacted by The Edge, GDB declined to comment, citing company policy.

At end-January, GDB clinched a RM306 million contract to design and build a private hospital in Bukit Jalil, KL. It was appointed by KL International Hospital Sdn Bhd — a subsidiary of KL Wellness City Sdn Bhd — as the main contractor for the project.

As at Dec 31, 2023, GDB’s outstanding order book amounted to RM398 million, with projects scheduled for delivery until 2026. The projects comprise the recently secured KL International Hospital in Bukit Jalil and an existing design-and-build contract for a logistics hub in Bandar Bukit Raja 2 Industrial Park in Klang, Selangor.

The hospital will be the centrepiece of KL Wellness City, which is poised to be a hub for both domestic and international healthcare and medical services, featuring centres of excellence across areas including cardiology, spine health, neuro health, sports medicine, cosmetic surgery and fertility.

Construction analysts The Edge spoke to anticipate that GDB’s ongoing projects will contribute positively to its performance. Moreover, the group will continue to tender for new projects to capitalise on market opportunities.

It is learnt that GDB has ongoing tenders worth a total of RM3.8 billion. The group is actively pursuing tender opportunities and will be submitting an additional RM2.4 billion worth of tenders in the first half of 2024. Its tender book comprises projects across the commercial, residential, mixed-use development, factory, warehouse and hotel sectors.

GDB was listed on the ACE Market of Bursa Malaysia Securities Bhd under the construction sector in 2018, before it migrated to the Main Market in 2020. The group has two subsidiaries, namely Grand Dynamic Builders Sdn Bhd (GDBSB) and GDB Geotechnics Sdn Bhd.

Its wholly-owned GDBSB is a construction services provider, focusing on high-rise residential, commercial and mixed-use development projects as a main contractor and principal works contractor.

Its 70%-owned unit GDB Geotechnics — formerly known as Eco Geotechnics — extends the group’s in-house capabilities to include geotechnical and foundation engineering works that include bored piling, soil treatment, earthworks and basement works.

GDB made a name for itself in 2013, when it won its first contract with Perdana ParkCity Sdn Bhd as the main contractor for One Central Park, a luxury 45-storey residential tower in Kuala Lumpur’s famed Desa ParkCity development.

A year later, GDB secured two contracts with Trans Resources Corp Sdn Bhd as the principal works contractor for KL Eco City Project 1 and KL Eco City Project 2 in Jalan Bangsar, KL.

A market observer believes GDB’s consistent track record in delivering projects ahead of schedule, along with the better sentiment in the construction industry, are factors contributing to rising investor interest in the stock recently.

GDB’s single largest shareholder is group managing director Cheah Ham Cheia, who has a 48.94% stake held via his investment vehicle CHC Holdings Sdn Bhd. Group executive director Alexander Lo Tzone Leong is the second largest shareholder with a 21.07% direct stake.

Among GDB’s top 30 largest shareholders are Yayasan Islam Terengganu, Eastspring Investments Small-Cap Fund, two Manulife funds and Press Metal Aluminium Holdings Bhd executive director Koon Poh Weng.

The dispute with KSK Group

GDB’s net profit shrank by 53% to RM8.03 million in the financial year ended Dec 31, 2023 (FY2023), from RM17.19 million a year ago. The earnings contraction was mainly due to the impact of work suspension on the 8 Conlay project.

This was exacerbated by higher project costs incurred at a completed project.

GDB was appointed as a main contractor by KSK Land Sdn Bhd — a wholly-owned unit of KSK Group — in November 2020 to build the iconic three-tower 8 Conlay luxury integrated development in downtown KL. The contract value of RM1.25 billion was the largest-ever secured by GDB.

The project had a good start in its first year as KSK Land celebrated the structural completion of the first tower, Tower A, of the YOO8 branded residences, serviced by Kempinski, at 8 Conlay onsite in November 2021.

The bombshell dropped in August 2022, when GDB suspended its work on the 8 Conlay project over payment issues. It sued KSK Land for a sum of RM120.7 million arising from what it claimed was a breach of obligations under a corporate guarantee.

Nonetheless, GDB lifted the suspension in January 2023 and resumed work on Tower A’s façade after receiving partial payment.

Two months later, GDB withdrew the lawsuit with liberty to file afresh, and remobilised and recommenced construction works on Tower A after receiving further partial payment, while other sections of works remained suspended.

KSK Land, however, failed to pay the outstanding sum under instalment in April 2023, and subsequently both parties were not able to reach a settlement consensus after having held discussions and negotiations that aimed to resolve the matter amicably.

Towards the second half of April last year, GDB and KSK Land served notices of determination on each other to end the contract. About a month later, GDB filed a fresh lawsuit against KSK Land to recover about RM102.1 million, which it contends is owed for services rendered on the 8 Conlay project.

In July 2023, an adjudicator — in adjudication proceedings in relation to the same claimed sum under the corporate guarantee — ordered KSK Land to pay RM97.8 million to GDB.

In January this year, GDB filed a winding-up petition with the High Court against KSK Land. The filing of the petition follows the court’s setting aside of KSK Land’s restraining order against its creditors, as well as an ex parte court order for leave to summon a meeting with the creditors as part of a proposed scheme of arrangement.

As it stands, the ongoing dispute is still being addressed through legal channels.

Although its single largest job, the 8 Conlay project, didn’t pan out as well as expected, GDB has never been loss-making over the past 10 years.

The price of the penny stock has soared 59.5% year to date to 29.5 sen last Tuesday (April 9), valuing the company at RM276.6 million. GDB’s shares are currently trading at a historical price-earnings ratio of 34.3 times based on earnings per share of 0.86 sen, which is considerably high for a construction company. The premium valuation of the construction stock might imply that its share price has factored in the likelihood of securing new jobs. 
 

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