Rising earnings seen for Gabungan AQRS

PETALING JAYA: Gabungan AQRS Bhd is expected to see rising earnings over the next three years due to accretion from its expanding orderbook of RM1.8bil.

MIDF Research said in a report the construction and property development firm’s swelling orderbook would boost both its revenue and bottom line from now until 2019.

“Gabungan AQRS’ construction backlog is 36 months, meaning that it is expected to recognise the billings in 2017 or 2018,” it said.

MIDF Research said this was underpinned by opportunities from projects such as One Jesselton in Kota Kinabalu, Sabah, and Kota SAS in Kuantan, Pahang.

The research house said the One Jesselton project, which has a net sales value of RM1.1bil, would replenish Gabungan AQRS’ orderbook and simultaneously generate revenue from rentals of its retail space once completed.

“The buck does not stop at One Jesselton – the Pan Borneo Highway in Sabah at a length of 12,000km needs a steady supply of precast materials.

“Furthermore, its joint venture with Sabah Development Corp enables it to position itself as a frontrunner to bag orders from Pan Borneo’s project delivery partner.

“We are estimating that the pre-cast supply will contribute RM40mil to Gabungan AQRS’ bottom line in 2018,” it said.

MIDF Research also said it expected Gabungan AQRS to participate in the construction of infrastructure within Kota SAS due to its expertise and local construction knowledge.

“We predict that the Kota SAS development will develop further due to the spillover effect of the East-Coast Railway Link.

“Furthermore, we believe China Communications Construction Co Ltd will seek local construction expertise to manage the key execution risk, especially the challenging soil factor cutting through Pahang’s mountainous topology.”

Based on its forecast, MIDF Research said Gabungan AQRS’ margin profile would increase due to its orderbook projects.

“Moving ahead, we reckon that the operating margin will maintain between 18.5% and 27.8%, which is higher than its KL Construction Index peers’ median of 17%.

“We note that the industrialised-building system content for Gabungan AQRS’ projects are expanding due to management’s vision of reducing foreign labour dependency.”

The research house added that the company would benefit from growing demand for affordable housing.

Gabungan AQRS’ forte is the construction of affordable housing, specifically under the schemes of PR1MA and Rumah Selangorku. Currently, it has secured two packages from PR1MA amounting to RM740mil in Pahang and Selangor.

“The packages beckon more affordable housing projects from PR1MA and the Selangor state government for Gabungan AQRS, as track record is crucial to win jobs,” it said.