We continue to like Gadang for its strong earnings visibility and undemanding valuation. 9MFY16 results were above expectations, accounting for 91%/85% of our/consensus’ full-year estimates. Wemaintain our BUY recommendation at a higher SOP-derived MYR2.85 TP (from MYR2.83, 40% upside). This TP comes after our earnings revisions as well as taking into consideration the cash infusion and an enlarged share base from its recently completed private placement.

Private placement is finalised. Gadang’s 23.1m new private placement shares have been fixed at MYR1.85 per unit, raising about MYR42.7m. This is expected to be mainly utilised in developing subsequent phases of its Laman View project in Cyberjaya and the Semenyih land that was acquired in late 2015. As at February, both Phases 1A and 1B of the Laman View project (comprising 325 Prima 1 apartments and 142 double-storey houses, launched in Jun and Jul 2015 respectivel y) reported fairly encouraging take-up rates. Its Semenyih land is going to be partly used to develop affordable homes under the Rumah SelangorKu programme. We note that Gadang is eyeing potential joint ventures (JV) for future affordable homes development in the Klang Valley and Johor. We are generally more positive on the affordable housing segmentdue to the resilient demand.

Earnings forecasts. As at February, its outstanding construction orderbookand unbilled property sales remain healthy at around MYR889.5m andMYR243.5m respectively. Its tenderbook has also increased to around MYR9bn(from MYR5bn). All in, we view that Gadang’s earnings visibility remains fairly strong over the next two to three years. We increase our earnings forecasts for FY16-18 by 9.5%-11.4% by mainly adjusting our assumptions on the profit margin for its various construction orders as well as the progress billing schedule of its property developments.

Maintain BUY. We revise our SOP-derived MYR2.85 TP after our earningsrevisions as well as taking into consideration the cash infusion and an enlargedshare base pursuant to the private placement. The revised TP implies 9x 2016FP/E, which remains below our benchmark 1-year forward target P/E for smalland mid-cap construction stocks of 10-14x. We reiterate our BUYrecommendation on the stock.