KUALA LUMPUR (Dec 12): Phillip Capital has initiated coverage of AME Elite Consortium Bhd with a “buy” rating at RM1.59, and a target price (TP) of RM1.96, and said the company is poised to reap rewards from the ongoing US–China geopolitical tension and potential Johor-Singapore special economic zone (SEZ).

In a note on Tuesday, the research house projected AME Elite’s earnings to grow 8% year-on-year (y-o-y) in the financial year ending March 31, 2025 (FY2025), and 15% y-o-y in FY2026, to be driven by higher contributions from its flagship development of i-TechValley, coupled with margin expansion.

“AME stands out in terms of its sole focus on industrial properties, which also offers a unique exposure to capture the ongoing inflow of foreign direct investment.

“We initiate [coverage] with a 'buy' rating and sum-of-parts-derived TP of RM1.96,” it said.

Phillip Capital said this is based on 14 times price-earnings multiple ascribed to the construction and engineering segments, and a 20% discount to property revalued net asset value (lower than the average 25% applied to property companies under the research house's coverage).

“We believe this is justifiable by the prevailing strong demand for industrial properties and potential catalyst of the Johor-Singapore SEZ.

“Key downside risks [include] higher building material prices and stiff competition within the industrial property sector,” it said.