AGX Group Bhd - Beat Expectations, Vietnam Push Weighs on Margins
Thu, 27-Aug-2026 07:58 am
by Research Team • Apex Research

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AGX (0299)

Target Price (RM)

0.74

Recommendation

Buy

• Excluding exceptional items, AGX reported 2QFY26 core net profit (CNP) of RM7.2m (+36.1% YoY; +40.2% QoQ), with 1HFY26 CNP tracking ahead of expectations at 57% of our full-year forecast and 54% of consensus full-year estimates.
• Revenue growth remained robust, though GP margin contracted as the Group prioritises market share gains in the newer, lower-margin Vietnam market. Higher contributions from Malaysia Airlines Berhad and VietJet Air are expected from 3QFY26 onwards, supporting GP margin recovery in 2HFY26.
• We raise our FY26F/FY27F CNP by +3.7%/+8.7% respectively, on stronger freight forwarding momentum and modest operating leverage from ongoing cost optimisation initiatives.
• Maintain our BUY call with a higher TP of RM0.74 (from RM0.69), based on 12.2x PE multiple applied to revised FY27F EPS of 6.1 sen (from 0.56sen).

Results above expectation. After excluding net impairment losses on financial assets (+RM1.15m), loss on disposal of a 30% equity interest in an associate (+RM0.45m), the Group's portion of IPO-related expenses incurred at an associate level (+RM0.52m) and net foreign exchange gain (-RM0.3m), AGX reported 2QFY26 core net profit (CNP) of RM7.2m (+36.1% YoY; +40.2% QoQ). This brings cumulative 1HFY26 CNP to RM12.4m, accounting for 57% of our full year forecast and 54% of consensus full-year estimates. We deem the results to be tracking ahead of expectations, particularly as 1H is typically the seasonally softer half of the year for the Group.
 

YoY. Revenue increased +46.7% YoY to RM102.9m, while CNP grew +36.1% YoY to RM7.2m, driven by broad-based revenue growth across all operating segments, led by air freight forwarding (+99.2% YoY to RM31.7m) and sea freight forwarding (+52.3% YoY to RM34.8m). The earnings growth was partially tempered by GP margin contraction to 20.9% (from 27.0% in 2QFY25), alongside associate contributions which remained broadly flat (+2.1% YoY to RM2.2m) following the sharp -70.6% contraction in 1QFY26.
 

QoQ. Revenue rose +23.8% QoQ to RM102.9m, while CNP grew +40.2% QoQ to RM7.2m, driven mainly by broad-based revenue growth led by air freight forwarding (+45.5% QoQ to RM31.7m) and sea freight forwarding (+31.5% QoQ to RM34.8m), alongside a rebound in associate contributions (+148.3% QoQ to RM2.2m). GP margin contracted to 20.9% (from 24.2% in 1QFY26) amid a revenue mix shift toward lower-margin freight forwarding segments.
 

Outlook. We remain positive on AGX's near-term prospects, supported by robust freight demand and continued regional expansion, notwithstanding a moderation in global growth momentum amid geopolitical tensions and trade policy uncertainties. Management remains confident of achieving satisfactory financial performance for FY26, underpinned by ongoing customer base diversification, operational efficiency initiatives and exploration of strategic partnerships. We expect the Aerospace Logistics segment to remain a key earnings driver over the medium term, with management guiding for higher contributions from Malaysia Airlines Berhad and VietJet Air from 3Q26 onwards, which should also support overall GP margin recovery. Meanwhile, associate contributions are expected to normalise into 2HFY26, following confirmation that a portion of the earnings drag in 1HFY26 stemmed from one-off IPO-related expenses at the associate level. Separately, the completion of All-Link Singapore's listing on the SGX-ST diluted AGX's effective equity interest in the associate, and we expect the resulting deemed disposal gain to be recognised in 3QFY26. That said, gross margin remains under near-term pressure as the Group prioritises market share gains in Vietnam, a newer and currently lower-margin market, with management guiding for margins to improve progressively as the Group scales up and establishes itself as a key regional player there.
 

Earnings Revision. We revise our FY26F/FY27F CNP upward by +3.7%/+8.7% to RM22.6m/RM26.3m (from RM21.8m/RM24.2m), respectively, to reflect (i) the stronger-than expected momentum in sea and air freight forwarding following the Group's market share gains in Vietnam, (ii) higher contributions from Malaysia Airlines Berhad and VietJet Air from 3Q26 onwards as guided by management, and (iii) modest operating leverage from ongoing cost optimisation initiatives.
 

Valuation & Recommendation. We maintain our BUY call with a higher TP of RM0.74 (from RM0.69), based on an unchanged 12.2x PE multiple applied to our revised FY27F EPS of 6.1 sen (from 0.56sen), supported by a three-star ESG rating. We believe AGX's structural growth drivers in aerospace logistics and regional freight forwarding remain intact, underpinned by improving 2HFY26 visibility on margin recovery and new client contributions.
 

Risk. Exposure to volatile trade flows, fuel price swings and fluid freight rates, as well as slowerthan-expected margin recovery in Vietnam.
 

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