AME’s 1QFY26 CNP came in at RM32.4 m (+121.3% YoY, +76.1% QoQ). The result was above our expectations, representing 36.7% of our full-year forecast and 21.8% of consensus estimate.
Supported by RM533.6m in unbilled sales, expected to be recognised over 12–18 months, alongside a remaining construction orderbook of RM255.9m.
We have revised our earnings forecasts upward by 44.1%/9.8% to RM132.2m/RM97.8m for FY26F/FY27F, reflecting the recognition of sales from 11 plots of land to Digital Hyperspace Malaysia Sdn Bhd (consideration: RM209.8m) as well as adjustments to our financial model following a change in analyst coverage and introduce FY28F earnings at RM103.8m.
We re-iterate our BUY recommendation with a higher TP of RM2.02 (from RM1.92), based on SOP valuations and an assigned three-star ESG rating.
Results above expectations. Excluding the gain on disposal of property, plant, and equipment of RM0.037m, core net profit (CNP) came in at RM32.4m, representing 36.7% of our full-year forecast and 21.8% of consensus estimate. The result was above our expectations but below consensus, largely due to the realised payment of RM209.8 m from the recent sale of 11 plots of land to Digital Hyperspace Malaysia Sdn Bhd, a data centre operator.
YoY. CNP advanced 121.3% YoY to RM32.4m (from RM14.6m), driven primarily by stronger contributions from the Property Development and Construction segments. Property Development operating profit surged 204.5% YoY, reflecting higher work progress and the timing of income recognition, while Construction operating profit rose 49.4% YoY in line with project progression. Growth in other segments partially offset a slight decline in the Property Management segment.
QoQ. Overall CNP increased 76.1% QoQ (from RM18.4m), supported mainly by the Property Development segment. Meanwhile, construction operating profit fell 60.5% to RM2.0m as higher expenses offset revenue and gross profit gains from project progress.
Outlook. In 1QFY26, the Group achieved RM84.6m in new property sales, with unbilled sales of RM533.6m (4QFY25: RM635.5m), providing earnings visibility for the Property Development segment over the next 12–18 months. Meanwhile, the Construction segment’s orderbook expanded to RM255.9m (4QFY25: RM114.2m). Growth will be underpinned by: (i) ongoing developments at i-TechValley @ SILC and i-TechHub, (ii) the pending land acquisition from KLK Bhd in Ijok, targeted for FY26, and (iii) the Northern TechValley @ BKE development, where the JV has secured RM25.8m in sales, RM12.6m in bookings, and RM74.6m in unbilled sales as of 1QFY26. Forecast borrowings are expected to lift gearing from 27.9% to 43.0% in FY26F, in line with funding requirements for acquisitions and new developments. Over the longer term, the Johor industrial property sector is expected to remain vibrant, supported by major infrastructure projects including the RTS, JS-SEZ, and the potential revival of the HSR, all of which are likely to attract stronger domestic and foreign investment.
Earnings Revision. After factoring in the stronger-than-expected contribution from recent land sales, we revised our earnings forecasts upward by 44.1%/9.8% to RM132.2m/RM97.8m for FY26F/FY27F, respectively, and introduced FY28F earnings of RM103.8m.
Valuation. We maintain our BUY recommendation with a higher target price (TP) of RM2.02 (from RM1.92), based on SOP valuations and an ascribed three-star ESG rating. The increase in TP reflects the application of a higher P/E multiple of 14x (from 7x) to the Construction and Engineering segment, justified by AME’s active tender pipeline and a valuation that is more in line with sector peers such as KERJAYA – 13.9x and BNASTRA (NR) – 14.6x. For the Property Development segment, we adopt a DCF approach (Ke: 7.7%), which better captures the timing of project cashflows and earnings visibility compared to the static RNAV method. We believe DCF offers a more transparent risk adjustment and aligns with AME’s cashflow-driven development model. We also factor in the adjustment of AME’s equity stake in AME REIT from 51.2% to 50.2%, arriving at a derived TP of RM2.02.
Risks. Policy changes, labour shortages, rising construction and financing costs, weaker FDI inflows, and slower-than-expected construction progress.
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Currency | Buy Rates (RM) | Sell Rates (RM) |
---|---|---|
USD | 4.202015 | 4.235318 |
EUR | 4.910409 | 4.915416 |
CNY | 0.591633 | 0.592086 |
HKD | 0.539313 | 0.543090 |
SGD | 3.271821 | 3.294958 |