AME Elite Consortium Berhad - Dragged by timing of property sales recognition
Thu, 29-Aug-2024 07:10 am
by Research Team • Apex Research

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AME (5293)

Target Price (RM)

1.85

Recommendation

Buy

Summary

AME’s 1QFY25 core net profit at RM14.7m (-36.7% yoy and +0.6% qoq) came below expectations, accounting to only 13.4% and 10.6% of ours and consensus expectations of RM110.3m and RM139.5m respectively.

Consequently, we slashed our earnings forecast by -32.3%/-26.4% to RM74.8m/RM88.6m for FY25F/FY26F respectively to account for the slower-than-expected timing of income recognition under the property development segment.

We re-iterate our BUY recommendation on AME with lower TP of RM1.85, based on SOP valuation.

 

Results Review

  • Results review. 1QFY25 core net profit fell -36.7% yoy and was relatively flattish at +0.6% qoq at RM14.7m, dragged down by the weaker property development segment that was impacted by lower work progress and timing of income recognition from the property development segment. Revenue for the quarter slipped -36.0% yoy, but rose +67.9% qoq to RM222.5m.

  • Below expectations. Reported core net profit came below expectations, accounting to only 13.4% of our core net profit forecast at RM110.3m and was at 10.6% of consensus forecasted net profit of RM139.5m. Key deviation is due to timing of recognition of project sales.

  • Operations Highlights. In 1QFY25, property development revenue stood at RM60.3m (-57.9% yoy). Likewise, construction segment revenue also decreased -24.0% yoy to RM37.3m, primarily due relocation of internal resources to focus onto industrial property development activities with certain projects at tail-end of completion. On a brighter note, AME recorded new sales amounting to RM266.5m in 1QFY25, which is largely on track to meet sales target of RM400.0m. Recall that FY24 new sales only stood at RM283.6m.

  • Industry Highlights. With the government move to push towards digital economy, we foresee increasing demand for industrial parks to support high-tech industries and innovation-driven enterprises. Rising FDI will play a large part in Malaysia’s economic growth via job creations and business opportunities.

  • Outlook. Going forward, we expect earnings to tick higher in remainder quarters, backed by unbilled sales amounting to RM434.5m (up from RM226.8m in 4QFY24), coupled with the outstanding construction & engineering orderbook of RM214.9m, sustaining earnings visibility until FY26F. The launch of new 176-ac industrial park at Penang that carries c.RM1.0b GDV in 4Q24 remains well on track.

  • Valuation. Following the weaker-than-expected earnings, we slashed our forecast by -32.3%/-26.4% to RM74.8m/88.6m in FY25F/FY26F respectively to account for the slower-than-expected timing of income recognition under the property development segment. Consequently, we maintain our BUY recommendation on AME, but with a lower target price of RM1.85 based on SOP valuation.

  • Risk. Geopolitical tensions, labour shortages, insufficient industrial land, and unexpected further rise in construction costs

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