Gabungan AQRS Bhd
Listed in 2012, Gabungan AQRS Bhd (Gabungan) is primarily involved in construction and civil engineering services, and also has a small property development arm. The company’s projects-in-progress include The Peak and Permas Centro in Iskandar Johor as well as The Altium in Selangor.

The company’s revenue has been steady, ranging between RM319 million and RM407 million from 2011 to 2013. Net profit declined in 2012 before making a recovery in 2013, boosted by the sale of property in Penang of RM15.3 million.

Gabungan’s 1H2014 sales surged 49.3% to RM278.8 million, already making up 68.6% of 2013’s full year revenue. Net profit for the half year totalled RM26.1 million, or 60.9% of the prior year’s profit.

Sales appear sustainable in the near future, backed by a large order book of RM1.9 billion as at 26 June 2014. The order-book is large compared to the company’s current market capitalisation of RM 619.96 million, and is about 4 times current annual revenue.

For now, however, the company is trading at premium valuations with price-to-book ratio of 2.3x and trailing 12-month PE ratio of 16.2x. Net debt stood at RM 98.4 million as at 30 June 2014, amounting to a manageable net gearing of 36.5%, with a high interest cover ratio of 13.3 times.

In its 2013 annual report, Gabungan’s management expressed its intentions to grow the business by acquiring companies in the mechanical and engineering sector, to complement its existing construction business. The management believes that the acquisition would extend the value chain of the business and create a new recurring income stream in building maintenance services.

It remains to be seen how this potential acquisition will be done, as the company has to either raise more borrowings or issue new shares to raise capital.

This article first appeared in The Edge Financial Daily, on October 24, 2014.