This article first appeared in The Edge Financial Daily on May 23, 2019
Gabungan AQRS Bhd
(May 21, RM1.24)
Maintain buy with a lower target price of RM1.72: Gabungan AQRS Bhd has reported its first quarter of financial year 2019 (1QFY19) results, with earnings deviating from our full-year forecast. Profit after tax and minority interests was booked at RM11.3 million, lower by 31.4% year-on-year (y-o-y) from the same period last year. Consequently, earnings accounted only 14.9% and 13.1% of our and consensus full-year estimates respectively.
Construction, being one of the key business segments, saw its 1QFY19 income drop by 36.2% y-o-y to RM70.1 million. For the quarter, its revenue was largely recognised from the works done for the Sungai Besi-Ulu Kelang Elevated Expressway and Pusat Pentadbiran Sultan Ahmad Shah. The two projects accounted for approximately 17.6% of Gabungan AQRS’ outstanding jobs. During the period, the progress of the light rail transit 3 (LRT3) package was slower due to a cost review done by the government. Subsequently, it resulted in Gabungan AQRS reporting lower segmental profit after tax (PAT) by 69% at RM6.1 million. The slowdown was partly expected, given the earlier guidance on a new work timeline of LRT3. We note that the progress is already picking up, which will likely manifest in 2QFY19.
Property revenue fell by 9.4% y-o-y from the corresponding period last year, attributable to lower work progress in The Peak project. Positively, the division rebounded from the RM1.4 million earlier losses in 1QFY18 to book RM4 million PAT in 1QFY19. For subsequent quarters, we expect sales to gain support from the initiatives introduced, such as a homeownership scheme and a cashback package. As of 1QFY19, Gabungan AQRS’ unbilled sales stood at RM91.5 million with unsold property units valued at RM532.5 million. The management is targeting RM500 million sales in FY19 on the E’island Lake Haven in Puchong and the relaunch of The Peak in Johor Baru City Centre.
Gabungan AQRS is supported by RM2.4 billion worth of outstanding order book to keep it busy until FY21. While we remain conservative on the outlook this year, it is targeting an ambitious RM1.5 billion of new jobs for FY19. Given that the current tender book is largely composed of infrastructure works, we opine that the timeline of the outcome is dependent upon the government’s finalisation of reviews and roll-outs of key projects. — MIDF Research, May 21