Vestland builds itself a good year ahead, a run-up of its shares could be maintained

It has been a good year for Vestland Bhd as it has jumped 60% in the past year. It made a strong comeback since the correction from its 1 Aug 2024 high of 53 sen has bottomed out.

In terms of financials, there is little excitement for the construction outfit based on its first quarter ended Mar 31, 2024 (1QFY24) results. The company posted a marginally lower net profit of RM7.55 million in 1QFY24 versus RM7.96 million a year ago.

This is despite registering a higher revenue of RM124 million in 1QFY24 versus RM88.66 million a year earlier. Vestland said the increase in revenue was mainly due to higher revenue generated from build segment, which mainly attributed to D’vine Residences Project. It also saw contribution from its design and build segment, which includes Beluran Police Camp Project and Pinnacle Subang Jaya SOHO project.

Despite the higher revenue, Vestland explained it posted lower net profit due to the higher finance costs, which mainly consists of interest expenses for revolving credit. This was partially offset by the lower administrative and operating expenses during current quarter and financial period ended 31 March 2024. Just last month, in July, it announced that it is buying office suites in Selangor and industrial warehouses in Sabah, for a total of RM25 million.

Its wholly owned subsidiary Vestland Resources Sdn Bhd had signed 10 sales and purchase agreements (SPAs) with Sg Besi Construction Sdn Bhd to buy 10 office suites at Subplace Boulevard, Shah Alam, Selangor, for RM6.99 million.

Vestland said upon completion of the proposed acquisition, the group will no longer incur RM20,934 in monthly rental commitment and will have better planning and control over the usage of the offices to cater for its business growth.

In addition, Vestland also signed six SPAs for a sum of RM18 million to acquire six semi-detached industrial warehouses to be constructed at Armani Business Park, Kota Kinabalu, Sabah, with completion expected by December 2024.

The company said it would be more flexible, cost effective and efficient for the group to own warehouses in Sabah to store materials/machineries (which are mostly sourced from Peninsular Malaysia) to be used for its construction projects in Sabah.

Vestland believed that it will be able to plan its procurement of raw materials through bulk purchase as they can be stored in the warehouses and be deployed to construction sites as and when required.

Generally, construction companies are on investors radar if they can bag mega projects. There may a number of construction companies, which have been facing tight margins and heavily in debt, but there are some gens if investors look hard enough.