• Maintain BUY (TP: RM0.49). Gabungan AQRS (AQRS) achieved a Core Net Profit of RM27.9mn in FY23, marking a 11.2% YoY increase, which made up 109% of our estimate, hence, deemed in line with our expectation. In contrast, revenue experienced a slight decline of 8.5% YoY, amounting to RM309.1mn compared to the previous year's RM337.8mn. This decrease is attributed to the higher revenue generated in the preceding year from the completion of the Sungai Besi - Ulu Kelang Elevated Expressway (SUKE) project. We reiterate our BUY call for AQRS, with TP of RM0.49 pegged at 9.1x PER to FY24F EPS of 5.4sen.

• Key highlights. In 4QFY23, there was a 31.1% YoY decline in revenue, amounting to RM71.5mn. However, there was a notable improvement in net profit, showing a 38.6% YoY increase, reaching RM6.8mn, compared to RM4.9mn upon exclusion of Liquidated Ascertained Damages (LADs). We do note that AQRS has reduced its total debt by RM49.2mn, with 40.5% of its short-term borrowings are related to project financing. This somehow falling behind their year-end target of RM100mn. AQRS has previously shared that its ongoing efforts to secure bank financing to resume construction work on The Peak project in Johor. Successful implementation of this plan is anticipated to result in annual savings of RM12mn-RM15mn in LAD charges, potentially doubling its earnings immediately. Nevertheless, as at 4QFY23, company's net gearing stood at 0.28x.

• Earnings Revision. We maintain our earnings for FY24F-FY25F.

• Outlook. We remain bullish on the company's positive growth trajectory, driven by the potential contract acquisition for the revised LRT3 station, which set to bolster the company's orderbook by an estimated RM100mnRM200mn. Furthermore, as ongoing projects near completion, AQRS is poised to unlock capacity for new projects valued of up to RM2bn. Anticipating a positive impact on the orderbook, we look forward to the launch of the affordable housing project, Gambang Residensi, with a Gross Development Value (GDV) surpassing RM350mn. The stock is currently trading at a merely 6.6x FY24F P/E, presenting a compelling 30% discount compared to its small-cap peers.

Source: BIMB Securities Research - 29 Feb 2024