Results Highlights

• AWC Bhd posted a 9.9% Y.o.Y gain in its 1QFY20 net profit to RM6.7 mln, from RM6.1 mln last year, after consolidating revenue from the newly-acquired subsidiary; Trackwork, despite a mild decline in IFM receipts. Revenue for the quarter, meanwhile, was 29.6% Y.o.Y higher at RM88.8 mln vs. RM68.5 mln in the previous corresponding year.

• The reported earnings and revenue were in-line with our forecast, accounting for 24.9% and 23.4% of our full-year estimates. Hence, we keep our forecast unchanged at RM26.8 mln and RM379.1 mln for its net profit and revenue respectively.

• Meanwhile, the rail division posted a strong pretax profit of RM5.3 mln in 1QFY20; cushioning the slowdown in the IFM (-11.0% Y.o.Y), Environment (-66.0% Y.o.Y) and Engineering (-229.0% Y.o.Y) profits due to higher operating costs, project delays and slight margin compression. We expect orders to remain resilient moving forward, backed by its sizable orderbook orders.

• We maintain our BUY call on AWC with an unchanged target price of 80.0 sen by ascribing to an unchanged target PER of 9.0x to AWC’s FY20 EPS of 8.9 sen as the fundamentals of the group remain sound; backed by strong earnings visibility, healthy cash flow generation and minimal capex requirements.

Source: Mplus Research - 29 Nov 2019