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Amid investor fears on Gabungan AQRS’ (GABQRS) future prospects within the construction space following negative news flow of the ECRL cancellation, we reaffirm our BUY call recommendation, while maintaining our target price of RM1.86 and earnings forecasts as
we had not factored in job wins from the ECRL project in our annual orderbook replenishment target for the company.
Our annual orderbook assumptions 2018-20 are RM500m, RM600m and RM700m respectively.
• Our unchanged valuation for GAQRS is premised upon: a) strong outstanding orderbook of RM2.5b as of Jun 18 (2.3x 2018F revenue),and b) the five-year plan to resuscitate its property arm which is expected to contribute considerable earnings in the coming years. For its property arm, its affordable apartment project called E’Island has received encouraging response from buyers, with almost 500 buyers having registered their interest before its official launch in Dec 18. Also the property transformation plan is expected to reward shareholders with an alluring annual dividend of 10sen/share, with potential upside assuming the company decides to distribute profit
from the construction arm to shareholders.
• On a separate note, GAQRS is confident of securing new job wins of RM1.5b in 2018, mainly from Pan Borneo Highway Sabah (>RM2b) and others civil contract works.
RECOMMENDATION
• Maintain BUY with a target price of RM1.86, based on 10x 2019F fully-diluted EPS of 18.6 sen, as small-mid caps de-rate to reflect tighter market liquidity
