Analysts confident Gabungan can meet RM700 mln orderbook estimate
KUCHING: Gabungan AQRS Bhd ( Gabungan) will likely meet analysts’ RM700 million orderbook estimate, backed by potential wins of mega projects such as the LRT3, Pan Borneo Sabah and ECRL.
In a report, the research arm of Kenanga Investment Bank Bhd ( Kenanga Research) said: “Year to date, Gabungan has secured RM360 million worth of contracts ( excluding the additional contract portion acquired from Monolight) accounting for 51 per cent of our RM700 million orderbook estimate.
“We remain confident with Gabungan in achieving our target, backed by potential contract wins from LRT3, Pan Borneo Sabah and ECRL.”
The research team also upgraded its earnings forecast of Gabungan by 24 to 32 per cent for the financial year 2017 ( FY17) and FY18.
Thi s is based on the acquisition of Monolight, and interest savings of circa RM10 million in FY18 post conversion of warrants given that they are currently in the money with expiry in July 2018.
“Our earnings is derived on the back of construction outstanding order- book of RM1.7 billion coupled with FY17 estimated replenishment rate of RM700 million, and property sales worth RM100 million in FY17 and RM250 million in FY18 from their Jesselton project,” it added.
The research team also pointed out Gabungan’s partnership with Tera Capital which is expected to have a positive impact on the group.
Of note, Gabungan signed a memorandum of understanding ( MoU) with Tera Capital – an investment firm with vast interest and knowledge within the hotel and real estate space with an intention to jointly develop One Jesselton ( GDV of RM1.8 billion).
Kenanga Research noted that under the MoU, Tera Capi t al would provide development concept designs and construction advice, hotel management and operation services for the hotel and suites, and marketing expertise via their vast network in Asia Pacific.
“We are positive as we believe having an experienced partner such as Tera Capital will expedite One Jesselton’s development and also reduce execution and operation risks for Gabungan’ hotel and suite operations,” it opined.
On Gabungan’s acquisition of Moonlight, the research team believed that the acquisition of Monolight is to obtain full control and rights over this PR1MA project and it is positive on the acquisition given that it is earnings per share ( EPS) accretive by circa 20 per cent.
It also noted that Gabungan would now enjoy 100 per cent of the project’s contribution translating to an additional profit of circa RM14 million to FY17 and FY18 based on 10 per cent profit after tax ( PAT) margins assumption.
“We note that Monolight’s previous business is in the supply of industrial wall panels and it has little or no experience in the construction industry with a recorded loss of RM0.6 million in their latest financial year,” it added.
Overal l , whi le Kenanga Research raised its earnings estimates of Gabungan, it pegged a ‘ not rated’ stance on the stock.