MARC Ratings has affirmed its MARC-1IS/AIS ratings on Gabungan AQRS Berhad’s (GBG) RM200 million Islamic Commercial Papers/ Islamic Medium-Term Notes (ICP/IMTN) Programme with a stable outlook.
The ratings affirmation reflects GBG’s established construction track record, that supports its ability to secure infrastructure contracts alongside its property development activities. This is moderated by limited near-term earnings visibility, slow order book replenishment, and potentially higher leverage from upcoming property launches.
GBG’s construction order book declined to RM267.1 million as at end-2025 (end-2024: RM362.0 million), comprising mainly internal works for the Serena Gambang development, with the balance coming from near-completion infrastructure projects. In the absence of new sizeable contract awards, near-term revenue visibility for the construction segment remains constrained. While GBG has received confirmation for a government-related contract worth about RM120 million, with the letter of award expected in May 2026, the timing and certainty of new awards remain key risks. Delays in converting its sizeable order book of approximately RM3.6 billion into firm contracts could continue to weigh on earnings visibility and cash flow generation.
Near-term performance of the property development segment hinges on monetisation of The Peak, Johor Bahru, a project with a gross development value (GDV) of RM689.0 million, targeted for completion in June 2026 after prolonged delays. Competitive pricing at an average RM782 psf — below that of comparable projects nearby — and improving housing demand in Johor Bahru, supported by the project’s proximity to the Johor Bahru–Singapore Rapid Transit System, underpin sales prospects. Net operating cash flow of RM192.0 million is expected over the next three years, subject to sales take-up and final resolution of liquidated ascertained damages.
Amid slow construction job replenishment, GBG is pivoting towards property development. Key projects include a Bangi joint-venture residential development (GDV: RM630 million; planned launch in 3Q2027) and Serena Gambang (GDV: RM493 million; planned launch in 2Q2026). While these projects provide growth potential, execution, funding and demand risks remain.
Revenue fell 20.4% y-o-y to RM246.0 million in financial year ended 30 June 2025 (FY2025), leading to pre-tax loss of RM1.3 million amid weaker construction activity and a reduced order book. Performance remained subdued in 1HFY2026, with revenue down 21.6% y-o-y to RM86.4 million, partially cushioned by sales from the E’Island Lake Haven property project. Borrowings increased to RM417.9 million following a term loan drawdown for The Peak, pushing the debt-to-equity ratio to 0.83x from historical levels of 0.5x–0.6x, with further leverage pressure expected from upcoming launches.
Near-term liquidity is supported by about RM73.0 million in expected cash inflows over the next 6–12 months, mainly from retention sums and the release of stakeholder funds from near-completion projects, as well as a RM110.0 million revolving credit facility secured in December 2025. However, liquidity strength beyond the next 12 months remains constrained by front-loaded debt maturities (about 71%) and reliance on pledged cash and facility rollovers, exposing the group to medium-term refinancing and cash flow risks.