[MARC] MARC Ratings affirms MARC-1IS/AIS ratings on Gabungan AQRS’ ICP/IMTN Programme

MARC Ratings has affirmed its ratings of MARC-1IS /AIS on Gabungan AQRS Berhad’s (GBG) RM200 million Islamic Commercial Papers (ICP)/ Islamic Medium-Term Notes (IMTN) Programme. The long-term rating outlook is stable.

The ratings affirmation incorporates GBG’s established construction track record that would enable the group to secure new infrastructure contracts, and the company’s improving liquidity position attributed to the completed units in its key property project in Johor Bahru and potential settlement of claims. Notwithstanding these, slower-than-expected contract replenishment and further weakening in debt metrics could trigger downward rating pressures.

As at end-March 2025, GBG’s construction order book stood at RM335.3 million, providing modest earnings visibility from construction activities. Over the near term, the order book is expected to improve with the addition of about RM1.2 billion worth of contracts – mainly government-related – that comprise the construction of the Paroi-Senawang highway valued at RM600 million, the reinstated Light Rail Transit 3 (LRT3) stations valued at RM350 million, and student accommodation facilities valued at RM160 million.

GBG’s key property project, The Peak in Johor Bahru, with a gross development value (GDV) of RM689 million, is nearing completion with relaunch scheduled for October 2025. With an average price of RM771 psf, below those of competing developments in the vicinity, the project stands to benefit from the improved housing demand in Johor Bahru and its proximity to the upcoming Johor Bahru-Singapore Rapid Transit System (RTS). Upon full sell-through, The Peak could generate about RM200 million in net operating cash flow after including construction costs, financing costs and liquidated ascertained damages (LAD) payments due to initial delay before GBG undertook the project turnaround. The group’s other property project, E’Island Lake Haven had achieved a take-up rate of 95% as at end-March 2025 and handover of the completed project is expected in 2H2025. In 1Q2026, GBG plans to launch a new mixed township development in Gambang, Pahang, which would comprise 961 landed units and 24 retail shops with a total GDV of RM400.0 million.

MARC Ratings notes that GBG’s financial profile has been impacted by its declining construction order book, thin margins and higher financing costs. For the first nine months of financial year ended March 2025 (9MFY2025), the group recorded modest revenue of RM151.3 million and pre-tax loss of RM10.2 million. Total borrowings rose to RM315.5 million in 9MFY2025 (FY2024: RM235.3 million), mainly due to term loan drawdowns for The Peak development. This translated to a debt-to-equity (DE) ratio of 0.63x that could potentially rise to around 0.7x on further drawdowns of its term loan to finance the completion of The Peak.

For FY2025, revenue generation is expected to be supported by the scheduled completion and handover of its existing LRT3 project (package GS04) and E’Island Lake Haven, which would unlock RM17.7 million in retention sums and RM74.66 million in gross cash from sold units. The rating agency understands that the group expects to receive settlement claims for its past projects that would support its liquidity position.

Akmal Sadiq, +603-2717 2939/ akmal@marc.com.my
Farhan Darham, +603-2717 2945/ farhan@marc.com.my
Yazmin Abdul Aziz, +603-2717 2948/ yazmin@marc.com.my