Gabungan AQRS Berhad (AQRS) has demonstrated robust performance, surpassing projections for the 18 months ending June 2024. The company's core profit of RM43.7 million significantly exceeded both the analysts' and market's expectations, achieving 115% and 112% of the full-year forecasts respectively. This impressive performance is largely attributed to the stronger-than-anticipated results from its construction segment, which includes notable infrastructure projects such as the Sungai Besi-Ulu Kelang Elevated Expressway (SUKE) and the Light Rail Transit (LRT) 3 projects. The property sector, while facing challenges, still holds potential with future prospects tied to the Johor Bahru-Singapore Rapid Transit System (RTS) Link station and other developments.

RHB Stock Broking House have maintained a positive outlook on AQRS, a BUY recommendation and adjusting the target price to RM0.53, reflecting a potential upside of 58% from the current market price of RM0.34. This target price revision incorporates a 3% yield for FY25. Despite a core pre-tax loss of RM13.6 million in the property division for the second quarter, the company's overall financial health remains strong. The construction sector continues to show resilience, with a core profit before tax of RM22.1 million, up from RM0.6 million a year prior.

Gabungan AQRS's order book stands at RM472 million, providing a solid foundation for future growth, especially as new job awards are anticipated. The company has successfully reduced its debt by approximately RM81 million, leading to a lower net gearing ratio of 0.26x in the second quarter of 2024 compared to 0.33x at the start of the year. This improved financial position positions AQRS well for future infrastructure projects and property developments.

The revised earnings forecasts for FY25-26 have been increased by 4% and 3% respectively, reflecting the accelerated recognition of construction project revenues. Additionally, the introduction of FY27 earnings forecasts, with a job replenishment rate of RM300 million, supports the new target price of RM0.53. This figure also includes a 2% ESG discount.

Looking ahead, the rollout of Phase 1B of the Pan Borneo Highway in Sabah presents a significant opportunity for AQRS, particularly for its 49%-owned precast business, SEDCO Precast, which could secure contracts valued between RM400-500 million. Furthermore, potential new property development joint ventures, including the Gambang Residensi project in Pahang with a GDV of approximately RM350 million, may drive future earnings.

Source: RHB
Title: Solidly Outpacing Projections; Stay BUY