MARC Ratings has revised the outlook on the long-term AIS rating of Gabungan AQRS Berhad’s (GBG) RM200 million Islamic Commercial Papers/ Islamic Medium-Term Notes (ICP/IMTN) Programmes to negative from stable. The short-term rating remains unchanged at MARC-1IS.
The outlook revision reflects growing concerns over GBG’s shrinking construction order book and slower-than-expected sales at The Peak in Johor Bahru. These factors have constrained cash flow generation and liquidity, resulting in greater reliance on borrowings. In the absence of corresponding cash inflows, leverage has increased while cash flow coverage metrics have weakened, reducing the group’s financial flexibility.
While the increase in borrowings was anticipated to fund the completion of The Peak, which achieved its Certificate of Practical Completion in May 2026 and is expected to obtain its Certificate of Completion and Compliance by end-September 2026, the project’s take-up rate has remained unchanged at 40%. The weak sales performance has delayed cash realisation, leaving the higher debt burden unsupported by sufficient cash inflows and exerting further pressure on liquidity and cash flow coverage metrics.
GBG’s outstanding construction order book continued to decline, falling to RM229 million as at end-June 2026 from RM267 million at end-2025 and RM362 million at end-2024. Of the total, RM201 million relates to the group’s own Serena Gambang development. The shrinking order book highlights the limited replenishment of external construction contracts and weakening earnings visibility. Although the group expects to secure a refurbishment project in Pahang valued at least RM120 million, the potential uplift would be modest and insufficient to meaningfully restore its construction pipeline. Meanwhile, the planned Bangi joint-venture residential development and Serena Gambang remain subject to execution, funding and market demand risks.
Revenue fell by 40.6% y-o-y to RM146.3 million for the financial year ended 30 June 2026, mainly due to the completion of major projects in the previous year and the absence of significant new contract awards. While the group remained profitable, posting pre-tax profit of RM8.2 million primarily from its property development segment, operating cash flow remained negative at RM51.7 million. Together with financing drawdowns for The Peak, this increased total borrowings to RM450.9 million and raised the debt-to-equity ratio to 0.89x from its historical range of 0.5x–0.6x, reflecting weaker leverage and liquidity metrics. Separately, the trial relating to its subsidiary’s RM501.3 million lawsuit associated with the SUKE highway project is scheduled for 31 May to 2 June 2027.
MARC Ratings will undertake a full assessment of GBG over the coming months. Downward rating pressure could arise if the group’s financial performance, liquidity position and cash flow metrics fail to improve meaningfully. Conversely, the outlook could be revised to stable if GBG demonstrates sustained improvement in its business and financial profile, particularly through stronger monetisation of The Peak and successful replenishment of its external construction order book, resulting in improved liquidity and debt-servicing capacity.