We maintain Buy call, forecasts and fair value of MYR1.45 following the release of FY13 results that came in within expectations.  We like Gabungan AQRS that has just emerged a serious contender for infrastructure projects in Malaysia, particularly, rail projects, following its winning of a viaduct package of the Klang Valley MRT project.

- Subdued 1Q.  1QFY13 net profit came in at only 15-16% of our full-year forecast and the full-market consensus net profit.  However, we consider the results within expectations as 1Q is typically a seasonally weak quarter as it embraces the impact of the long Chinese New Year break.  In addition, during the early part of 1Q13, a long wet spell also hampered concreting works.

-  Risks. The risks include: (1) New contracts secured in FY13-14 coming in below our target of MYR500m p.a.; and (2) Higher-than-expected input costs.

-  Maintain BUY.  With the 13th general election now out of the way, we believe investors will refocus on sector fundamentals that are reasonably attractive underpinned by a construction upcycle.  Gabungan AQRS caught our attention when it clinched a MYR303.5m subcontract for Package V1 of the Sg Buloh – Kajang (SBK) MRT Line project in Sep 2012.  We believe the contract is a turning point for AQRS as it has effectively lifted the company from “just another contractor” to a new force to be reckoned with in the local construction sector.  The company is also in good hands, predominantly run (and substantially owned) by former engineers of Sunway.  We value AQRS at MYR1.45 based on 10x FY14 EPS, in line with our 1-year forward target PER of 10-16x for the construction sector.

Source: RHB