Company Profile
GFM Services Berhad (GFM) principle activities in integrated facilities management, consultancy service and asset management of concessions. GFM majority managed government building or building of government link companies. Some of the buildings managed by GFM as of year 2020 as follow:
Integrated facilities management services provider for EduCity Compound, Edu City Hub. EduCity Complex 2, EduCity Village and EduCity Sports Complex at EduCity, Iskandar Puteri Johor
1 April 2021 to 31 March 2023
RM 6,286,350.24
Operation and Maintenance Services for PIC Village 1 and 2 and all associated facilities, Non Process Building and Gate House at Pengerang Integrated Complex
14 September 2020 to 13 September 2023
Fixed unit rate
Universiti Teknologi Mara (UiTM)
To carry out the Asset Management Service of the facilities and infrastructure until October 2035.
Make up of 37.90 % of 2020 revenue.
Operating asset of RM 312,522,869 with an interest rate of 9.80 %.
Asides building management, GFM also involve in engineering, procurement, construction and commissioning (EPCC) services such as:
Installed Solar Generation system for 6 UiTM campus
1 July 2020
RM 30,000,000 for 11,057 kWp (RM 2,713 per kWp)
Profit share with Atlantic Blue Sdn Bhd, GFM subsidiary receive 10 % (RM 3,000,000)
2 month per campus after notice to proceed.
Acquisition
Proposed acquisition of 49 % in a downstream oil and gas player, Highbase Strategy Sdn Bhd
Principally involved in the provision of engineering services for the Oil & Gas industry, including clearing, repair and maintenance services of storage tanks, pressure vessels and heat exchangers in Malaysia
Project value from 31 December 2020 to 31 December 2024 amount RM 261,100,000
51 % joint venture with Singapore based O&G integrated solutions provider, Mun Siong Engineering Limited
GFM will subscribe for 2,882,352 new HSSB shares for RM 1.00 (49 % of HSSB shares)
GFM to proposed to subscribe a minimum 15 millions and up to 20 millions of redeemable convertible preference shares (RCPS) based on issued price of RM 1.00 with a fixed dividend of 6 % per annum.
GFM also enter into a call option to acquire 117,648 of HSSB shares (2 %) for RM 0.51 per share valid until 31 July 2024.
Propose acquisition 70 % of AMZASS (M) Sdn Bhd
Pay RM 500,000 initial deposit in date return if Definitive Agreement not executed
Stop date extended three time until 30 September 2021
Upgrade existing facilities of North bound and South bound Benbam lay-by in state of Malaka into a rest and service area.
Employees Share Option Scheme (ESOS) and Employee’ Share Grant Scheme (ESGS)
GFM had two ESOS Option 1 exercise price is RM 0.4555 issue on 30-08-2018 while option 2 is RM 0.4041 issue on 17-06-2019. Both ESOS expired in March 2023. As of 31 December 2020 number of exercisable share option units is 2,172,000 (0.42 % of outstanding shares as of 31 December 2020). ESOS is able to exercise anytime.
As of 31 December 2020, the ESGS has 199,000 numbers of shares granted. THE ESGS had same expiry date with ESOS.
Warrants
GFM had a warrant with exercise price of RM 0.38 and expiry date of 28 January 2022. As of 31 December 2020 the number of outstanding warrants is 235,456,129.
Income Statement
GFM revenue had increase 4.94 % over the 4 year period however the nett profit had decrease by - 3.67 %. The decrease of nett profit was mainly due to the increase of interest expense from Rm 1,030,000 in 2017 to RM RM 23,400,000 in 2020. Besides that, GFM also had highest effective tax rate from 32.01 % in 2017 to 51.72 % in 2020.
Balance Sheet
GFM had a high debt of RM 330,770,000. Of the debt RM 167,281,659 (50.57 %) is term loan IV which is a floating rate loan, 2020 interest rate is 5.75% compared to 6.35 % in 2019. GFM is repaying a monthly instalment of RM 1,900,928 over 147 months. This loan was taken due to the construction of UiTM campus.
Asides that, GFM had issue RM 165,000,000 medium term notes under sukuk on 21 December 2018 which has a coupon payment due every 6 month with the interest rate of 6.2 % to 6.65 %. The Sukuk tranch is repayable from 2028 to 2033. As of December 2020, the SUKUK value is RM 150,248,861 (45.42 %).
GFM has a high current ratio of 2.52 and high cash balance of 74.22 % of the total current asset. Of the RM 73,377,766 of deposit, cash and bank balance, RM 47,563,935 or 64.82% of the cash is pledge to certain borrowing and not able to be use.
Cash Flow
In 2018 there is a large cash flow out from investing due to the acquisition of KP Mukah Development Sdn Bhd, the company that had cossesionair with UiTM. The acquisition is to be supported by cash flow from mid term loans which show in the cash flow from financing.
GFM is positive growth of cash flow from operation and free cash flow of 15.29 % and 15.66 % respectively.
Per Share Analysis
GFM is trading at its lowest P/E value since 2017. GFM price is decreasing at the rate of -22.54 %.
Dividend
GFM dividend yield is below 10 year Malaysia Government Bond.
Dupoint Analysis
In 2020 GFM ROE had increased from 5.64 % in 2019 to 7.48 % in 2020. The increase of ROE was mainly due to increase of net profit margin by reducing operating cost and cost of sales.
Growth Rate
GFM had a growth rate of 6 %.
Capital Asset Pricing Model (CAPM)
Altman Z Score Model
Altman Z Score model is use to predict the chance of business going bankrupt in two years. GFM had a Z score of 1.11 in 2020
Research Report
No recent research report
Technical Analysis
GFM daily chart shown downward trends support level RM 0.17
GFM weekly chart shown a weak upward trend base on ichimoku cloud. Support at RM 0.19 Resistance at RM 0.46.
Maximum drawdown for GFM is 90 %.
KLSE Personal View
GFM customer mostly are government or government link companies, political unstable might affect the revenue of GFM if their maintenance contract is not extended
Has operating lease of RM 312,522,869 until 2035 for UiTM. Stable income until 2035. Around RM 45,000,000 of 37.90 % of the 2020 revenue is secured until 2035.
10 % partnership for EPCC contract to build Solar System for 6 number UiTm campus. RM2,713 per kWp which is a reasonable price during the signature of contract however with current increasing and unstable cost of photovoltaic cells the price might be a bit tight. RM 3,000,000 to GFM is completely done
Acquisition of 49 % in Highbase Strategy Sdn Bhd (HSSB) - O&G downstream company. RM 2,882,359 for 49 % of share. Projected value of HSSB contract until 2024 is RM 261,100,000 (estimated RM 102,351.20 - 0.8 safety factor)
GFM had a call option to purchase 2 % of HSSB share at RM0.51 (49 % discount) until 31 July 2024. GFM management can exercise the option and make HSSB subsidiary of GFM when they think HSSB is profitable for the company
GFM plans to subscript Rm 15 million to RM 20 million of RCPS with a fixed 6 % per annum.
GFM proposal to acquired AMZASS (M) Sdn Bhd which had contract to upgrade existing plus highway north bound and south bound Benbam lay by in state of Malacca into rest area. However it had proposed three time. Latest Stop date is 30 September 2021. RM 500,000 deposit had been paid to AMZASS.
ESOS and Warrant are out of money at the point of writing.
GFM took out RM 317,530,520 (96 % of 2020 total debt) to support the concessionaire with UiTM which had operating lease of RM 312,522,869 until 2035
GFM had positive flow in free cash flow while negative growth in price. The price did not growth with the company's free cash flow.
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