GABUNGAN AQRS BHD

GABUNGAN AQRS’ addition of real estate investor, Ted Fang, and his private investment vehicle, Tera Capital Ltd (TC), confirms that AQRS is working to strengthen its capital in its transformation plan. Furthermore, considering One Jesselton’s (OJ) size of gross development value (GDV) of RM1.8bil, TC heavily reduces a key execution risk. The risk is able to be offset through a partnership with an experienced party in hotel management and operation so that the operating income from unexpected shortfall from hotel operations is minimised. Notably, since the appointment of Datuk Azizan Jaafar as CEO in May 2016, AQRS’ operating income grew by a compound annual growth rate (CAGR) of 14.6% quarter-on-quarter (qoq).

OJ is anchored by Sabah’s buoyant tourism sector, leading MIDF Research to believe that the project will provide AQRS with a competitive advantage. For the past three years, Sabah has recorded total tourist arrivals of between 3.42 million and 3.55 million annually. MIDF Research doubts that the tourism tax will have an adverse impact to future AQRS’ hotel business.

This is because the business is buffered by a duty-free mall as well as the fact that holiday-goers from cruise liners dock within OJ’s future development.

MIDF Research is optimistic that AQRS will be able to sustain its revenue stream given its sturdy RM1.8bil order book. This is supported by AQRS having a lower debt ratio of 0.76 times in comparison with peer KLCon Index of 0.81 times.

MIDF Research is confident AQRS will be able to meet its RM600mil order book replenishment target and recommends a “buy” with a target price of RM1.62.