AWC is expected to deliver a sharp earnings uplift in FY26F, with Group core earnings projected to rise to RM33.1m (+48.9% yoy), driven by the turnaround of previously loss-making government concession contracts. Management is actively re-tendering expiring contracts at improved rates, while concurrently expanding its higher-margin non-concession segment. The Group’s two-decade track record in managing public sector contracts supports our view that it remains well-positioned to secure favourable terms and rebuild its recurring income base.
While STREAM has begun exploring growth opportunities in the Middle East, we expect near-term contributions to remain concentrated in Malaysia and Singapore, where AWC commands ~90% and 40% market share respectively. Macro uncertainty and slower decision cycles abroad may delay project rollouts, leaving domestic and regional execution as the key revenue drivers over the next 12-18 months.
We continue to see strength in the engineering and rail divisions, with incremental contributions from data centre MEP works (under engineering) driving order book visibility. These projects carry structurally better margins due to their technical complexity and critical reliability. Supported by a favourable segment mix, we forecast Group core earnings to grow at a CAGR of 34.9% over FY25-27F.
We initiate coverage on AWC with a BUY recommendation and a TP of RM0.78 based on 8x FY26F EPS of 9.7sen and appraised with a three-star ESG rating.
Key Investment Highlights
Structural Turn in Progress. AWC’s government concession contracts are undergoing a structural reset, following the expiry of legacy agreements that had previously suppressed margins. To recap, several of the Group’s concession contracts were signed at fixed rates that did not reflect rising cost pressures, resulting in periodic losses. With renewal discussions underway, management has proposed a stepped-up fee structure comprising RM50m for the first 10 years, RM51m for the following 5 years, and RM60m for the subsequent 13 years. This revised structure is intended to better accommodate cost inflation and lifecycle asset requirements. Further value enhancement could be realised through the potential adoption of the Comprehensive Asset Replacement Programme (CARP), which would formalise lifecycle capital expenditure recovery into the contract framework. Concurrently, AWC is actively expanding its non-concession portfolio, which contributed c.50% of segmental PBT in FY24. These contracts generally offer higher margins and shorter durations, allowing for faster capital rotation and improved commercial agility. In parallel, the Group is participating in new tenders under the Hospital Support Services (HSS) and Maintenance, Engineering, Electrical and Technical (MEET) programmes, both of which are expected to support the replenishment of the Group’s recurring income base. We forecast Group core net profit to rise to RM37.9m by FY27F, translating into a three-year CAGR of 34.9%, driven by margin normalisation from renewed concessions and continued contribution from the expanding non-concession segment.
Stream Division, Patience Pays Off. STREAM continues to dominate Malaysia’s Automated Waste Collection System (AWCS) segment with an estimated 90% market share and maintains a strong presence in Singapore with around 40% share. STREAM is currently engaged with the federal government on pilot initiatives under the Perumahan Madani programme, which aims to enhance waste collection efficiency through broader system adoption. Channel checks suggest AWCS typically accounts for ~1% of development cost, applying a mid-range RM6m per project, Malaysia’s 106,236 new residential units in 2024 imply a recurring addressable market of roughly RM127m/year. Even in the absence of a full mandate, partial adoption at scale could improve revenue visibility and support long-term growth. STREAM is also widening its footprint to hospitals, transport hubs and airports in Singapore, while pursuing early opportunities in the UAE. However, macro headwinds and lengthy approvals are likely to stretch UAE execution timelines, limiting near-term order-book replenishment. Reflecting this, we adopt a conservative stance and project a -0.5% CAGR in STREAM’s segmental PBT over FY25-27F.
Leveraging Infrastructure Spend. AWC’s engineering division is expected to benefit from the government’s push for infrastructure upgrades under the National Energy Transition Roadmap (NETR), which allocates RM7bn for retrofitting energy-inefficient government buildings. Market checks indicate that 60-70% of public buildings are still non-compliant with modern energy standards, presenting a sizeable pipeline of addressable projects. Beyond government-related works, the division is also well-positioned to tap into the accelerating rollout of hyperscale data centres across Malaysia. Based on an annual capacity addition of 700MW, an average build cost of RM20m/MW, and a 2% plumbing work scope, we estimate a plumbing-related market opportunity of c.RM30m/year. Incorporating a conservative 7% annual revenue growth assumption, we forecast an incremental contribution of roughly RM0.4m/year to the Group’s earnings from this division over FY25-27F.
Mega Projects in the Pipeline. AWC’s rail division is currently bidding for systems work packages worth between RM300m and RM400m under the RM2bn Penang LRT Mutiara Line. This comes on the back of its proven delivery track record in major urban rail projects such as MRT1 and MRT2, as well as existing long-term maintenance contracts with KTMB and Prasarana. Looking ahead, the division is targeting substantially larger contracts under upcoming national infrastructure projects, including MRT3 and the Kuala Lumpur–Singapore High-Speed Rail (HSR), both of which are expected to offer sizeable contract scopes. These pipeline opportunities present potential upside to our base case, which currently assumes a moderate 3% CAGR in rail segmental PBT from FY25F to FY27F, supported by steady contributions from existing maintenance jobs and active participation in new tenders.
Valuation & Recommendation. We initiate coverage of AWC with a BUY recommendation and a target price of RM0.78 based on 8x FY26F EPS of 9.7sen and appraised with a three-star ESG rating. The applied multiple reflects a 30% discount to the one-year average PE ratio of 12x to reflect AWC’s diversified conglomerate structure, a profile that mitigates earnings volatility but moderates the growth scalability.
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| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 4.212042 | 4.248408 |
| EUR | 4.921000 | 4.929487 |
| CNY | 0.591903 | 0.592919 |
| HKD | 0.540309 | 0.544492 |
| SGD | 3.268153 | 3.293573 |