AME Elite Consortium Berhad - In-line as favourable segment mix lifted margins
Mon, 02-Dec-2024 06:19 am
by Research Team • Apex Research

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AME (5293)

Target Price (RM)

1.92

Recommendation

Buy

 

  • Results review. 2QFY25 core net profit (CNP) added +2.7% yoy and jumped +52.2% qoq to RM22.4m, driven by better contribution from construction segment which saw acceleration of projects progress alongside with firmer contribution from property investment and management services segment which yields better margins. Revenue for the quarter, however, fell -19.8% yoy, but rose +31.5% qoq to RM187.2m. An interim dividend of 3.0 sen per share, payable on 30 Dec 2024 was declared.

 

  • Within expectations. For 6MFY25, reported core net profit at RM37.1m (-17.7% yoy) came within in-house expectations, accounting to 49.8% of our full-year core net profit forecast at RM74.6m, but was only at 21.0% of consensus forecasted core net profit of RM169.7m.

 

  • Operations Highlights. During the quarter, AME recorded new sales amounting to RM91.6m, bringing 6MFY25 new sales to RM359.1m (+166.8% yoy), supported by solid demand for industrial properties at the Group’s i-TechValley at SILC industrial park. Recall that FY24 new sales only stood at RM283.6m. Consequently, AME has revised new sales target from RM400.0m to RM550.0m (our in-house target is at RM500.0m, which remains unchanged).

 

  • Industry Highlights. With the government remains committed to push towards digital economy, demand for industrial parks to support high-tech industries and innovation-driven enterprises is expected to remain sturdy.

 

  • Outlook. Going forward, we expect earnings to tick higher in upcoming quarters, backed by unbilled sales amounting to RM459.5m (up from RM434.5m in 1QFY25), coupled with the outstanding construction & engineering orderbook of RM148.2m, sustaining earnings visibility until FY26F. The newly launch of new 176-ac industrial park at Penang that carries c.RM1.3bn GDV in 4Q24 has commenced construction since August 2024 will continue to anchor revenue stream from the property development segment over the longer-run.

 

  • Valuation. No changes to our earnings forecast. Consequently, we maintain our BUY recommendation on AME, but with a higher target price of RM1.92 based on SOP valuations (refer table below) as we roll over our valuation metrics to FY26F.

 

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

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