• Gabungan AQRS (AQRS) is poised to capitalize on government pump-priming measures, leveraging its substantial involvement in public infrastructure. It stands to benefit from the rationalization of diesel subsidies, which strengthens the government's fiscal capacity for implementing essential infrastructure projects.

• We remain sanguine on the company's earnings growth, supported by its strategy to improve financial liquidity through monetizing unsold completed units and further strengthening its cash flow and reducing net gearing.

• We maintain a BUY call on AQRS with a TP of RM0.49. Key drivers for the stock price include securing new infrastructure projects and expanding its property development portfolio.

Set to Benefit from Government Pump-Priming Measures

We reaffirm our view that AQRS is well-positioned to benefit from the government's pump-priming measures. The rationalization of diesel subsidies is expected to boost the government's fiscal capacity, enabling the implementation of key infrastructure projects, including Phase 1B of the Sabah Pan Borneo Highway and other public initiatives. AQRS is poised to gain significantly from these projects, particularly through its involvement in public works and leveraging on its associate company, SEDCO Precast Sdn Bhd, which will benefit from the Sabah Pan Borneo project rollout. Moreover, the revival of five LRT3 stations along AQRS's current project route enhances the company's prospects for securing this project. This could help mitigate the declining trend in the company's orderbook (Refer Chart 2).

Enhanced Cash Flow with Asset Monetization

We remain sanguine on the company's earnings growth, expecting net profit to improve following the finalization of financing structure in 2H2024. AQRS aims to improve its financial liquidity by monetizing unsold completed units valued at RM9.9mn. This strategy is anticipated to strengthen AQRS's cash flow and reduce net gearing further supported by its robust outstanding orderbook of RM468.0mn, along with property unbilled sales of RM236.7mn. These sales are expected to be gradually recognized until 2H2024, further aiding in the company's recovery.

Expanding Property Portfolio for Sustainable Earnings

AQRS aims to bolster earnings sustainability for FY24-28 through the launch of Gambang Residensi, an affordable housing project with a RM382mn Gross Development Value, slated for year-end. The East Coast Rail Link (ECRL) station, located within 1km of the project serves as an additional catalyst for enhancing its property value. Meanwhile, The Peak, AQRS's luxury property in Johor, will continue to be highly profitable, benefiting from its proximity to the Johor Bahru-Singapore Rapid Transit System (RTS) Link. Its connectivity to public transport, namely the Johor Bus Rapid Transit (BRT) and access to major highways like the Eastern Dispersal Link (EDL), enhances its market appeal.

Maintain a BUY call with TP of RM0.49

Maintain a BUY on AQRS, with a TP of RM0.49. In light of numerous catalysts, the stock appears compelling, trading below -2SD and 3-year mean PER. Notably, the company is lagging behind both the construction sector and the broader Johor property rally theme

Source: BIMB Securities Research - 17 Jul 2024