[GFM (0039) - Facility Management Company]
GFM is a company that operates Facility Management. Facilities
management services include electromechanical systems, security,
cleaning and maintenance services.
GFM was founded in 2000 and has grown into one of the best facility
management services companies. GFM has been in the industry for almost
20 years and has a regular customer from the government / private
sector.
Most of the companies would like to focus on their core business, and
usually outsourcing the facilities service property/premises management
to other professional companies, as to have a better cost control,
maintain the property value, safety and cleanliness for their employee
and customer
GFM is aware of this, so it provides services as such to help
organizations solve the difficulties of facility management. Customers
can continue to work for their core business without having to worry
about facility management.
The contracts for facilities management services usually last for
several years, and it will not very frequent replacement of facility
management companies. Unless GFM is not properly manage on client’s
property and premise. Therefore, the company's revenue can be quite
stable.
Based on June 2019, the company has 2 business lines:
1) Facilities management services (accounting for 74% of total turnover)
2) Franchise (26% of total turnover)
1) Facilities management services (accounting for 74% of total turnover)
2) Franchise (26% of total turnover)
In the past 5 years, the company's turnover has continued to improve,
from RM 57mil to RM 123mil in 2018, and the growth rate is amazing, with
a CAGR of about 21%. Gross Profit Margin has remained at 27%-29% for
the past 3 years, and the profit is remain high. Although a record peak
turnover was recorded in FY2018, after-tax profit fell to RM 12mil
compared to previous years, mainly due to the one-time expenses incurred
by GFM's purchase of KPMD (KP Mukah Development Sdn Bhd) and some
corporate activities last year. And it is believing that this one-time
expenses will not be in the future, and the company's profit will return
to normal.
GFM's current dividend policy is to pay 40% of PATAMI (based on core
earnings). GFM pays dividends once a year, usually in July. The last
dividend paid by the company was 4 Jul 2019, and one cent was paid out.
Based on the current stock price of RM 0.365, the dividend yield is about 3%, which is not very attractive.
The fiscal year 2019 will be included in the KPMD account. Based on the
performance of the past 7 months, KPMD has earned an average of RM
3.3mil, and it is expected to increase profits by 40mil in one year.
Assuming facility management services maintain 2Q19 performance
throughout the year, the performance will grow to RM 17.1mil. Compared
with last year, the operating profit of facility management services
will be greatly improved. Adding KPMD's 40mil profit and deducting
internal trading is about 8.8mil. GFM's operating profit is expected to
climb to RM 47.7mil, but interest expenses will surge to RM 26.6mil due
to higher loans.
The operating profit for 2018 was only RM15.5mil, and the dividend was
paid 1.1 cents. If the operating profit in 2019 rises to RM 16mil, we
believe that the dividend should remain at the same level.
Of course, all these are just predictions, investors still need to pay
attention to ensure the company will continue to maintain good results.
GFM is still focusing on to strengthen facilities management services
and will also bid for more facilities management projects. The company's
Order Book currently has RM 1.35bil. In addition, KPMD has also brought
a new business model to GFM, which can bring profitable growth and
increase profit margin. Management is very much looking forward to meet
the profit brought by KPMD in FY2019, and will ensure that this
long-term profit can be stable. After all, the franchise rights of KPMD
and UiTM still have 17 years of contracts.
To ensure that the company remains competitive, GFM will also provide
high-quality services and more innovative technology to many customers.
In addition to focus on the growth of GFM, GFM continues to look for
more opportunities for future development.
The company's Order Book is currently about RM 1.35 bil. Prior to the
company's acquisition of KPMD, GFM's Order Book was approximately RM
280-300 mil, which could support a turnover of 2-3 years. Although Order
Book all the way up to RM 1.35 bil, and most of it was about UPM TM
franchise of KPMD. It is not difficult to find that the company's Order
Book has gradually declined on a quarterly basis, mainly because GFM
will implement a part of the Order Book every quarter. Therefore, the
company still needs to continue to find more management facilities
projects and extend existing contracts to improve the company Order
Book.
Assuming the GFM core business reaches RM 47.7mil, deducting interest
and taxes will earn about 16mil. Considering that the EPS in the next
year can reach 3.37 cents, PE 15 is about RM 0.505, and PE 10 is RM
0.335.
Although GFM acquires KPMD, its profit will be guaranteed in the next
16-17 years, but GFM's interest expenses will surge 24 times. It also
virtually bottomed out GFM's pre-tax / post-tax profit. It is considered
a risk to invest in GFM.
Louis Yap
Facebook:
Web Site:
