Stream’s growth outlook remains solid, supported by a RM100m tender pipeline across Singapore and Malaysia, driven by the NEA-mandated AWCS rollout and rising adoption in smart-city and hospital projects.
Recurring income is set to become a key growth driver as more systems enter the post-completion O&M phase under the BOT model, providing steady cash flow and higher-margin contributions.
The Group has introduced the new Shuttle System, offering cost-efficient, space-optimised solutions with low energy usage, targeting small- to mid-scale developments to broaden market reach and support long-term earnings visibility.
Maintain BUY recommendation with an unchanged TP of RM0.92, based on 9x FY26F EPS of 10.2sen, supported by a three-star ESG rating.
We came away reassured from our site visit to AWC’s Star Residences project in Kuala Lumpur, which reinforced our confidence in the Group’s prospects. Key highlights are as follows:
Healthy Tender Pipeline in Singapore and Malaysia. AWC’s tender pipeline remains healthy at around RM100m, mainly supported by opportunities in Singapore and Malaysia. In Singapore, demand remains strong under the NEA-mandated rollout of Automated Waste Collection Systems (AWCS) for all new HDB and private developments, with around 50,000 HDB units scheduled for launch between 2025 and 2027. Stream also holds a strong position in the hospital segment, supported by the government’s Healthier SG infrastructure programme. These projects typically involve multi-pipeline systems, stainless-steel components, and strict hygiene requirements, which translate into higher margins compared to conventional residential jobs. In Malaysia, growth is driven by smart-city and township developments in the Klang Valley and Johor, as developers adopt AWCS to meet GreenRE and GBI certification standards in line with the country’s energy-transition agenda. These drivers are expected to sustain healthy order book replenishment and strengthen margin visibility over the medium term.
Growing Recurring Income Base. Recurring income is emerging as a key earnings pillar as more AWCS systems transition into their post-completion phase. Under the build-operate-transfer (BOT) structure, Stream typically provides two years of O&M services, after which clients commonly extend maintenance contracts with the Group. Each installation has a design lifespan of up to 30 years and generally requires one to two servicing cycles annually. Based on estimates, a RM20m residential project with about 5% of its contract value allocated to O&M could generate around RM0.5m in recurring annual revenue potential post-completion. O&M margins are expected to exceed those of EPCC works, as the service-based nature of O&M entails lower material and operating costs, providing structural support for recurring earnings growth. As of FY25, recurring income accounts for c.20% of segmental revenue.
Expanding Product Offering. To capitalise on rising sustainability requirements and green-building certifications, the Group has strengthened its portfolio with the energy-efficient Shuttle System, developed for small- to medium-density and mixed-use developments. Demand is expected to gain traction gradually, supported by its low energy consumption of c.7kW compared to 55-125kW for conventional vacuum plants, as well as its compact and quieter design. In addition, the Shuttle System offers a more cost-efficient installation process, driven by its smaller scale and shorter execution timeline, positioning the Group to capture a wider range of projects and sustain earnings visibility over time.
Arbitration Win. On 5 November, AWC announced that its subsidiary, Trackwork & Supplies Sdn Bhd, was ruled in favour by the Asian International Arbitration Centre in a dispute involving an unpaid sum for the supply of materials. The award comprises RM2.2m in outstanding payment with interest of 5 % p.a. from 15 Sep 2021 until full settlement, and RM0.3m in legal and arbitration costs. The decision is expected to result in a one-off gain and cash inflow of approximately RM2.5m. While the award may still be appealed, management believes the counterparty has limited grounds for success as the case has already been fully adjudicated through arbitration.
Earnings Revision. We maintain our earnings forecasts, as the development remains within our existing assumptions.
Valuation. We maintain our BUY recommendation with an unchanged TP of RM0.92, based on 9x FY26F EPS of 10.2sen and supported by a three-star ESG rating. We like AWC for its (i) leading AWS system market share (90% in Malaysia, 40% in Singapore), (ii) predictable cash flows from both concessionaire and non-concessionaire segments, and (iii) promising growth prospects from untapped projects in Abu Dhabi, which collectively represent a potential RM1bn order book.
Risks. Failure to secure improved rates for government concession contracts under the IFM segment, slower-than-expected order replenishment in the Environment segment, and potential delays in mega infrastructure projects that could weigh on Rail segment prospects.
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| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 4.166777 | 4.199913 |
| EUR | 4.811011 | 4.820428 |
| CNY | 0.586842 | 0.587429 |
| HKD | 0.535790 | 0.540066 |
| SGD | 3.190939 | 3.216443 |