We maintain our forecasts for AQRS following the award of a MYR21m MRT building job, which we deem the first small step towards meeting our FY13 new contract win assumption of MYR500m.  In view of the 50% rise  in  its  share  price  since  we  initiated  coverage  in  Dec  2012,  we downgrade  the  stock  to  SELL  (from  Buy),  while  our  TP  is  cut  to MYR1.15 (from MYR1.45) to reflect dilution effect from new warrants. 
 
- First  key  job  in  FY13.  Gabungan  AQRS  (AQRS)  has  secured  a MYR21m contract for the construction of a multi-storey MRT station car park in Kajang, Selangor. This is the  first key contract it has secured in FY13,  which  boosted  its  outstanding  construction  orderbook  by  2%  to MYR880m (see Figure 1) from MYR859m. Assuming an EBIT margin of 5%,  the  contract  will  fetch  MYR1.1m  EBIT  over  the  contract  period ending Sep 2015.   

- Forecasts.  Maintained  as  we  have  already  assumed  AQRS  to  secure MYR500m worth of new contracts in FY13.

- Downgrade  to  SELL.  The  fundamentals  of  the  construction  sector  are strong  backed  by  ongoing  and  shovel-ready  mega  infrastructure, property  and  oil  and  gas  (O&G)  projects.  However,  upside  for  AQRS’ share price is exhausted following a 50% rise since we initiated coverage in Dec 2012. We cut our TP to MYR1.15 (from MYR1.45), based on 10x FY14  EPS  of  11.5sen  (having  reflected  the  dilution  from  the  just completed issue of free warrants with an exercise price of MYR1.30 on a nine-for-20 basis), in line with our one-year forward target P/E of 10-16x for the construction sector. Downgrade to SELL from Buy.

Source: RHB