Affin Hwang maintains Buy on Gabungan AQRS, raises TP to RM1.88

KUALA LUMPUR: Affin Hwang Capital research has raised the target price of Gabungan AQRS Bhd , one of its top market and sector buys, to RM1.88 from RM1.65 previously.

According to Affin Hwang, AQRS is looking to tie-up with a Bumiputera contractor with a large balance sheet, which will allow it to bid for a multi-billion ringgit contract under the Bumiputera category for the East Coast Rail Link.

It said the company has a cost advantage with its established construction operation in KotaSAS, which will have an ECRL station, and its acess to quarry stone supplies in Pahang.

Meanwhile, AQRS has also submitted RM2.2bil worth of tenders for the Pan Borneo Highway Sabah with Suria Capital.

"AQRS has good prospects to grow its remaining order book of RM1.96bn, equivalent to 3.6x FY18 construction revenue. 

"We assume it will secure RM1.5bn worth of new contracts in 2019E and RM1bn p.a. in 2020-21E. 

"But we cut our core EPS by 3-5% in 2019-21E to reflect slower new contract awards and dilutive impact from the exercise of warrants," it said.

In its property segment, AQRS has launched its E'Island Residence affordable condominium and relaunched The Peak condominium in 2Q19.

Affin Hwang noted that the company has achieved booking of RM75mil in 1H19, mostly for the E'Island project, and that take-up rate remains low due to weak property market conditions.

However, it is able to weather the weak demand and offer a rent-to-own scheme for The Peak due to low bank borrowings to finance the property projects.

Analyst Reports