INVESTMENT MERIT

Sweet gains in three months. Since our Trading Buy recommendation back in 28 March 2013 when the share price was traded at RM0.96, the stock has performed fairly well with a 34%-gain within the three-month investment period. A strong performer, its share price has clearly beaten the benchmark FBMKLCI which only increased by 4.4% to 1,762.87 for the same period.

Construction order book remains strong. Gabungan AQRS (GBAQRS)’s outstanding external construction order book currently stands at around RM500m, which includes the outstanding RM265.5m MRT-Package V1 project (Sg. Buloh to Kota Damansara Station) and RM1123.8m upgrading roadworks at Jalan Rantau to Sungai Gadut, Negeri Sembilan. These projects would provide earnings visibility for the next three years. 

Eyeing for more contracts.  Management guided that they are looking to replenish its construction order book by at least another RM500m by year-end through securing another building project.  Given that the 13 th General Election is out of the way and job-flows are streaming back, we believe this is fairly achievable, which would  double its outstanding external order book to around RM1.0b.

Its time to take profit. At the current price of RM1.29, GBAQRS is trading at 8.8x FY13 PER which appears to be slightly stretched at this juncture for a small-to-mid size construction player. We believe the upside potential is minimal in the short-term as it has exceeded our initial Target Price of RM1.10. Hence, we are recommending investors to take profit for now. Nevertheless, GBAQRS’s long-term outlook remains intact given that the domestic construction sector which is currently on an up-cycle will support its order book expansion plan and further strengthened by upcoming launches of its property projects in Klang Valley and Johor. As a result, we do not discount that to re-enter the stock when its share price showing some weaknesses in the future. 

TECHNICALS

Resistance: RM1.32 (R1), RM1.40 (R2)

Support: RM1.20 (S1), RM1.10 (S2)

Comments: Following an impressive post-GE13 run up, GBAQRS now appears to be stuck in sideways mode. Trading volume has also tapered off while the indicators favour the downside. As such, traders should consider taking some money off the table for now, and perhaps look to buy back closer to the RM1.19/ 1.20 support.  

BUSINESS OVERVIEW

Gabungan AQRS is a civil and building contractor which specialises in IBS technology and is also a property developer. It has CIDB Grade-G7 and PKK Class-A licenses that allows it to tender for for government projects of any value. Over the years, the group has successfully completed numerous projects for the government such as the LDP extension (RM277m), the Seremban–Senawang federal road (RM110m), 43 school blocks in Selangor & KL (RM150m), Institut Kemahiran Belia Negara (RM90m) and others.

BUSINESS SEGMENTS

Construction.  Its construction arm, which mainly focuses on building and civil construction, is the core contributor to the group’s earnings, contributing 84% of the FY12 revenue.

Property Development.  The group ventured into property development in 2004 through its maiden project namely The Residency with a GDV of RM93m. To date, the group has a total confirmed GDV sales of RM953.4m through various property development projects such as Gombak Grove @ Setapak, Contours, The Avenue @ Kinrara and The Peak @ Johor Bahru.

Source: Kenanga