Elite Client Idea #21

G & M Holdings Limited (HKEX Ticker: 6038; Price: HK$ 0.14)

G & M Holdings (‘group’) is a relatively small Hong Kong based operator with a reasonably strong position in the niche industry of designing and building podium facades (92% of revenues), curtain wall works (3%), and their repair and maintenance (5%). All revenues are generated in Hong Kong.

It has significant concentration of sales with two customers generating 86% of revenues. Furthermore, supply was disrupted during the pandemic lockdown in mainland China resulting in increases of transport and labour costs.

It uses contract accounting for revenue recognition – and reported TTM revenues of HK$ 424m (FY21: $403m), ebitda of $48m (FY21: $48m), and net profits of $38m (FY21: $37m).

Average earnings over the recent past - including up and down years - also approximate TTM earnings of $38m. Moreover, operating cash flows in the recent six-month period was strong at $82m.

The financial position is strong with net cash (including marketable securities) of $155m. Net current asset value stood at $252m and net tangible assets were $267m.

Net current assets were largely comprised of contract assets and receivables. Contract assets grew in line with revenue recognition, and though receivables aged slightly compared to the prior year, only ~$4m were over 90 days old.

The equity is currently trading for $140m, which is 56% of net current asset value and 3.7x earnings.

The interim dividend was cut to zero; but prior year dividends ranged $14-24m yielding 10%+ at market. This was diluted to an extent with the issue of employee stock options in FY21 for 3% of outstanding shares at an exercise price of $0.161/share.

The group has orders in hand of $725m and is bidding for a further $121m of contracts – this is stable compared to prior years. Prospects are reasonably favorable as Hong Kong resumes normal commercial and residential construction activity.

Overall, this stock appears to be selling below liquidation value with remunerative accrual of earning power and satisfactory prospects.

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Update note (originally published Nov 29, 2022)

The “below liquidation value” setup has largely played out. Shares recently trade around HK$0.36 (6 Feb 2026) versus HK$0.14 at publication, and the company has also returned cash via dividends (including interim/special payouts in 2024 and a special dividend declared for Jan 2026).

Operating results stayed profitable but were choppy. FY23 revenue/profit were HK$496.6m/HK$57.0m; FY24 eased to HK$429.3m/HK$43.1m after a one-off HK$29.4m impairment on a deposit for a Mongolian coal‑mining right (a clear departure from the original “HK-only facade contractor” thesis).

In 1H25, revenue rebounded 22% yoy to HK$239.3m and profit rose to HK$39.5m, while cash and bank balances increased to HK$375.5m and net current assets to HK$311.6m.

Management says the mining deposit is fully provided and has started legal action to recover it.

The remaining swing factor is workload: projects on hand were ~HK$132.5m at 30 June 2025 (plus HK$48.1m awarded after period) amid intense tender competition.