This article first appeared in Corporate, The Edge Malaysia Weekly, on May 30 - June 5, 2016.

GABUNGAN AQRS Bhd’s partnership with state-linked companies, including Sabah’s Suria Capital Holdings Bhd and Tanah Makmur Bhd — whose major shareholders include Pahang’s crown prince Tengku Abdullah Sultan Ahmad Shah — puts it in  a good position to bag future jobs.

Through these partnerships, Gabungan AQRS has managed to secure projects such as the development of One Jesselton Waterfront in Kota Kinabalu and the construction of Pahang’s new state administrative centre in Kota SAS, Bandar Baru Kuantan.

Partnerships with companies that have strong shareholders is definitely a boost for any up-and-coming company wanting to build its name and gain a foothold in any industry. For Gabungan AQRS, the partnership with Suria Capital could open doors to future opportunities for the group. 

This is because Suria Capital, being a Sabah government-linked company (GLC), is expected to benefit from the transformation of the state capital, Kota Kinabalu. Suria Capital is spearheading the transformation of the Kota Kinabalu Port area into a prime waterfront city.

Kota Kinabalu Port used to be the state’s main port before the development of the Sapangar Bay Container Port and Oil Terminal (SBCT) in Sapangar Bay, which is further northeast of the city.

In March last year, Gabungan AQRS announced that it had entered into a joint-venture agreement (JVA) with Suria Capital to build a mixed-use development on a seven-acre piece of land in the Kota Kinabalu Port area. The project was tentatively named One Jesselton Waterfront.

As per the JVA, Gabungan AQRS will have an 82% stake in the JV, with Suria Capital holding the rest. Gabungan AQRS will guarantee a minimum return of up to RM198 million, to be settled with RM166.4 million in kind and RM31.6 million in cash to Suria Capital.

Gabungan AQRS CEO and major shareholder Datuk Azizan Jaafar tells The Edge that the One Jesselton Waterfront project will have a gross floor area of 1.7 million sq ft, based on a floor ratio of 5.7 times.

“Three years ago, I was scouting around for opportunities everywhere. I also looked for land in KL but it was too expensive. Everybody is becoming a developer in the Klang Valley. So that’s why I started to explore outside, first in Pahang and then in Sabah.

“As for the One Jesselton Waterfront project, all the big names in the property development sector were eyeing it. Eventually, we won the project,” says Azizan, who was executive director from 2012 and took over the helm as CEO on April 25.

Gabungan AQRS plans to have a soft launch for One Jesselton Waterfront in October or November, and the official launch early next year. The development, with a  net sale value (NSV) of RM1.8 billion, will be integrated with Kota Kinabalu’s main ferry and cruise terminal.

Besides transforming the Kota Kinabalu Port area, Suria Capital is also upgrading the SBCT. The project, which will start next year, will see the port’s container handling capacity more than double to 1.25 million TEUs (20-foot equivalent units) from the current 500,000 TEUs.

Under the 11th Malaysia Plan, Kota Kinabalu has been selected as one of the focus cities in Malaysia, along with Kuala Lumpur, Johor Baru and Kuching. Besides the redevelopment of Kota Kinabalu Port and the upgrading of SBCT, Sabah will also see the construction of the Pan Borneo Highway.

As Suria Capital is expected to be a beneficiary of the highway project, will Gabungan AQRS, via its partnership with Suria Capital, also gain from the 706km highway?

While Gabungan AQRS is hopeful of getting more jobs from its partners, Azizan says he does not want to jump the gun on whether the company would get to participate in the mega project.  

In its partnership with Tanah Makmur, Gabungan AQRS holds a 30% stake in a company that is developing Pahang’s new administrative centre, Kota SAS. 

Kota SAS is coming up on 1,500 acres of former plantation land owned by Tanah Makmur. The township, whose main focal point will be the Sultan Ahmad Shah Administration Centre, is envisaged to have 6,000 residential units and house 30,000 people. Kota SAS will have a total gross development value (GDV) of RM4 billion, and be completed over 10 to 11 years.

Gabungan AQRS has said that it is waiting for the contract to build the RM300 million administration centre to be finalised. 

So, how was a company that was listed merely four years ago able to bag some of the major property projects in Pahang? 

“Some people think that I am the son of somebody important, which is why I have got strong connections. I come from a normal family background; my father used to work for the Penang Port Commission,” Azizan says. 

In 1996, he joined Ahmad Zaki Sdn Bhd as a contracts general manager and was subsequently appointed senior executive director. He left Ahmad Zaki in 2009 and went on to start his own business, dabbling in real estate.

After a couple of years, he was brought into Gabungan AQRS as an independent non-executive director in 2011. As the company headed for its initial public offering (IPO) in 2012, Azizan was made executive director.

His 12.5% stake in Gabungan AQRS is held through Ganjaran Gembira Sdn Bhd, which is the second largest shareholder of Gabungan AQRS, after Lim Ann Kok, the group’s founder.

Says Azizan, “So one day, Tengku Abdullah summoned me to Kuantan to advise him on how to make the Kota SAS development a success. From there, I got involved with the project which features a new township development concept that hasn’t been done in Pahang before.”

He has a 10.8% stake in Tanah Makmur Kota SAS Sdn Bhd, the master developer of the entire Kota SAS township project. 

In total, construction jobs for these two projects are worth RM1.5 billion, with the development of One Jesselton Waterfront accounting for RM849 million. Gabungan AQRS is also building Perumahan PR1MA Bhd’s affordable homes in Bukit Gambang, Kuantan and Sepang.

The group’s construction order book stood at close to RM2 billion as at Dec 31, 2015, while its market value totalled RM371 million as at last Friday, when its share price closed at 95 sen.

However, it should be noted that the group made a net loss of RM9.89 million last year, compared with a net profit of RM52.9 million in the preceding year. The group’s property development business was hit by sales cancellations as buyers could not secure financing.

Year to date,  Gabungan AQRS’ share price has fallen by 21.35% to 95 sen last Friday.  However, it has risen 15.85% from its 12-month low of 82 sen on April 28.

In the first quarter ended March 31, 2016 (1Q2016), it recorded higher net profit than the preceding quarter, at RM3.75 million on higher sales value from Contours Courtyard Villas, The Peak Services Apartments and Permas Centro shop offices.

So far, only Affin Hwang Investment Bank Research is covering the stock. The bank’s analyst Loong Chee Wei upgraded Gabungan AQRS to a “buy” from a “sell”, and revised its target price to RM1.20 per share, from 70 sen. Based on last Friday’s closing price, the share price has the potential to appreciate 26.3% over the next 12 months to reach the target price. The investment bank valued Gabungan AQRS’ revalued net asset value per share at RM1.33.  

“We believe prospects  have improved for Gabungan AQRS to grow its construction order book and property development activities. Azizan is driving the group’s future growth by participating in various state governments’ affordable housing projects,” Loong says in a May 23 report.

Judging from the projects it has won to date, the future seems bright for Gabungan AQRS under Azizan’s stewardship. However, as he put it during the meeting with The Edge, the proof of the pudding is in the eating. 

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