While Widad Group Bhd may not be among the more prominent construction companies on Bursa Malaysia, there seems to be investing interest in its shares.
Construction stocks have fallen out of favour in the past three years or so, partly because the government needs to be extra prudent in infrastructure building due to its tight fiscal position. The Covid-19 pandemic has added to the government’s fiscal burden.
Furthermore, the slowdown in the property market has resulted in a dearth of construction work.
However, judging by its share price pattern, Widad does not seem to be off investors’ radar screens. From 38 sen on March 31, 2018, its share price soared to an all-time high of 81 sen in late December 2020.
The counter then retreated from the peak to 58.5 sen at end-March 2021. Still, the rise in share price is rather sharp at 54% for the three-year period. This translates into a three-year compound annual growth rate of 15.5% for Widad’s return to shareholders, edging out other more illustrious rivals in the industry.
To put things in perspective, the benchmark Bursa Malaysia Construction Index fell close to 36% during the same period, from 282 points in March 2018 to about 181 points at end-March 2021.
It is noteworthy that Widad’s market capitalisation has largely been in the RM1 billion band, in contrast to other better known construction companies, which have faltered over the years.
Widad took over the listing status of Ideal Jacobs (M) Corp Bhd via a reverse takeover (RTO) exercise — valued at RM520 million in a mix of shares and cash — in August 2017.
The RTO of Ideal Jacobs triggered a mandatory general offer at 23 sen per share. Consequently, businessman Tan Sri Muhammad Ikmal Opat Abdullah’s private vehicle, Widad Business Group Sdn Bhd, ended up controlling close to 52% of Ideal Jacobs, which is now known as Widad.
The low-profile Muhammad Ikmal, who hails from Kedah, also controls 34.37% of IT company Dataprep Holdings Bhd, where he took the reins from Datuk Lim Chee Wah, the youngest son of the late Tan Sri Lim Goh Tong, founder of Genting group.
Muhammad Ikmal was in the news at end-2019 when he and Widad Business Group put in a RM5.3 billion cash offer to take over the North-South Expressway (PLUS) from Khazanah Nasional Bhd and the Employees Provident Fund. But the deal was later axed by the Pakatan Harapan government.
A chunk of Widad’s current order book of RM1.62 billion is derived from Serendah Heights Sdn Bhd, its newly acquired 90%-owned subsidiary. According to Widad’s annual report, the 90% stake was valued at RM114.62 million.
The appeal of Serendah Heights was a RM791 million concession to construct facilities and infrastructure and to carry out asset management services at a Universiti Teknologi Mara campus in Jasin, Melaka.
There have also been other contracts secured lately, such as the construction of a road from Kota Baru to Kuala Krai in Kelantan, from the Ministry of Works, valued at RM244.3 million; upgrading works of roads linked to Northport in Port Klang, valued at RM194.32 million (up 28% from RM151.8 million previously); a RM129.4 million contract to upgrade a water treatment plant in Kuala Muda, Kedah; and a RM53.2 million job from the Ministry of Works to build a school in Bangi, Selangor, which should augur well for the company.
For the six months ended June 30, 2021, Widad posted a net profit of RM2.73 million on revenue of RM48.31 million. Compared with the previous corresponding period, net profit was down 9.6%, despite a more than 30% increase in revenue.
Widad explains in its results announcement that included in the administrative cost is a one-off expense related to the acquisition of Serendah Heights, namely stamp duty and professional fees, amounting to RM2.47 million.
“If not for these expenses, the group would have recorded a profit before tax of RM5.85 million for the current quarter and RM7.4 million for the financial period to date,” it says.