Sizable Orderbook Will Buoy Revenue

Prospects

• AWC Bhd’s outlook remains resilient, backed by sizable orderbook, long-term IFM concession contracts and minimal capex requirements due to its asset-light business structure. The group’s new contracts replenishment, meanwhile, is expected to be around RM285.0 mln in FY20 against a tenderbook of RM1.5 bln.

• Although AWC is still undervalued at forward PER of 6.7x, which is below its threeyear mean of 8.0x, we are ceasing coverage on AWC Bhd due to reallocation of internal resources and the lack of retail and institutional interest. Our last recommendation was a BUY.

• The group is expected to post a double-digit growth in both its FY20 earnings and revenue, although we foresee weaker performance in FY21, following lower billings from the ten-year CARP concession.

• Moving forward, the group could benefit from the improving outlook of the local construction sector, in-tandem with the revival of mega infrastructure developments like ECRL. Downside risks to our call, however, include unexpected year-end kitchen sinking activities and project delays that could lead to thinner margins.

• Our last assigned target price was RM0.80, by ascribing to an unchanged target PER of 9.0x to AWC’s FY20 EPS of 8.8 sen

Source: Mplus Research - 10 Jan 2020