• Maintain BUY (TP: RM0.49). Gabungan AQRS (AQRS) 9MFY23 Core Net Profit of RM20.6mn (+12.1% YoY) was within our expectations of RM25.6mn and thus, in line with our estimate. Meanwhile, AQRS's revenue for the corresponding period experienced a marginal improvement of +2.2% YoY to RM237.6mn, attributed to the nearing completion of few construction projects and a robust take-up rate of over 90% for most of AQRS properties, with the exception of The Peak, Johor. Nevertheless, we maintain BUY on AQRS, with a TP of RM0.49, based on its FY24F EPS of 5.4sen, pegged to a PER of 9.1x based on its 3-year mean.

• Key highlights. In 3QFY23, there was a slight -0.4% YoY decrease in revenue to RM81.4mn, while the Core Net Profit, excluding Liquidated Ascertained Damages (LAD), saw a positive growth of 2.2% YoY, reaching RM7.0mn; attributed to effective cost management that trimmed expenses from RM8.2mn to RM7.4mn compared to the preceding year. Notably, total debt experienced a significant 27.9% reduction to RM88.3mn since 1QFY23, contributing to a 17.9% QoQ decline in gross gearing, while net gearing remained steady at 0.22x. Consequently, we are optimistic that AQRS is progressing towards its goal of reducing borrowings by RM100.0mn by the year-end.

• Earnings Revision. We maintain our earnings for FY24F-FY25F.

• Outlook. Malaysian construction sector is expected to experience a boost in 2024 driven by domestic infrastructure projects. Notably, the revival of five LRT3 stations along AQRS's ongoing project route, positions the company favourably as a potential candidate for the project. Furthermore, the Gambang Residensi project, featuring landed residential units in the RM300k range, has the potential to contribute to affordable housing initiatives. The strategic placement of an East Coast Rail Link (ECRL) station within 1km of the project site, along with its alignment throughout the region, positions AQRS strategically for various opportunities, acting as an additional catalyst to enhance their property segment.

Source: BIMB Securities Research - 30 Nov 2023