• We recently met with Gabungan AQRS (AQRS) management team and came back feeling reassured of its positive outlook.

• Management has shared its view that it will be able to fully sell and complete its long-delayed housing project namely The Peak, Johor, capitalizing on buoyant Johor property market. This will result in cost savings of RM12-15mn p.a. from delay in handover, hence potentially doubling its earnings.

• In near term, the company is poised to secure the contract to construct the restated LRT3 Temasya station as well as working towards the launching of a new affordable housing development namely Gambang Residensi with a total GDV of RM386mn.

• Maintain AQRS as a BUY with a TP of RM0.49 pegged at 9.1x PER to FY24F EPS of 5.4sen. The stock is currently trading at merely 6.6x FY24F P/E which is at 30% discount to its small-cap peers. Set to Complete and Monetise The Peak Project in Johor AQRS is optimistic that it will be able to complete the construction and fully sell the units at The Peak, Johor, capitalizing on the buoyant Johor property market. Management has shared that it is currently working to get bank financing to re-commence the construction work and it expects to complete the project by 2HCY2025. Successful implementation of this plan will contribute to annual savings amounting to RM12-15mn in Liquidated Ascertained Damages (LAD) charges, thereby possibly doubling its earnings immediately. As at 9M23, AQRS recorded a total of RM10.2mn in LAD.

Sets Stage for RM2bn Project Capacity

The company is gearing up to bid for upcoming infrastructure projects namely the High-Speed Rail (HSR) and MRT3, aiming to bolster its orderbook. Anticipating the completion and handover of ongoing projects like LRT3, E’Island Lake Haven, and Pusat Pentadbiran Sultan Ahmad Shah (PPSAS) in FY24, it plans to free up capacity for new projects valued up to RM2bn. Drawing on its successful track record with LRT3, the company is in good position to secure financing for significant infrastructure initiatives.

Poised for Orderbook Expansion

We hold a positive outlook on the potential contract win for the construction of the restated LRT3 station, particularly the Temasya station located within the alignment of the LRT line where AQRS has been working on. Successful bid for this project holds the promise of contributing an extra RM100-200mn to the company's orderbook. Additionally, the orderbook is anticipated to receive a boost from upcoming property launches, notably the Gambang Residensi. This affordable house development, comprising over 1,150 units, is set to be launched in 1Q2025, boasting a Gross Development Value (GDV) of RM386mn.

Maintain BUY with unchanged TP RM0.49

We maintain BUY on AQRS, with a TP of RM0.49. In light of numerous catalysts, the stock appears compelling, positioned at around -1SD and below its 3-year mean PER which justifies our BUY call. Notably, the company is lagging in both construction sector and the overarching Johor property rally theme.

Source: BIMB Securities Research - 27 Feb 2024