Summary

• We attended AME Elite Consortium Bhd’s (AME) post 4QFY21 results briefing and came away feeling slightly upbeat on the prospects of AME moving into FY22. After a quiet period in 1HFY21 due to the impact of Covid-19, we gather that AME has secured new property bookings of RM107.8m in FY21. Moving into FY22f, AME targets RM200.0m of new sales, subject to the Covid-19 situation. This will exceed the RM140.0m new sales recorded in FY21.

• We expect the resilient property sales to sustain, premised to the several new enquiries from overseas clients for property bookings. On the SiLC land acquisition, AME has received shareholders approval on 8th April 2021 and is currently pending Economic Planning Unit (EPU) consent. The move will enlarge AME landbank to 237.0-ac, bringing additional gross development value (GDV) of RM1.50bn. For the time being, unbilled sales amounting to RM64.3m will be recognised progressively.

• On the rental of workers dormitories, occupancy rate for i-Stay@Indahpura and iStay@Senai Airport City remains relatively healthy at 97% and 95% respectively. Meanwhile, the expansion of i-Stay@Indahpura with 2 new blocks will generate additional 2,700 beds, bumping total capacity to 5,200 beds at end-2021. Upon completion, expansion is expected to generate additional RM7.5m of rental income per annum, based on full capacity.

• To ensure un-interrupted work progress under the implementation of FMCO, AME has submitted the applications to MITI, pending for approval. Based on the previous round of MCO, we note that all works have received permission to proceed. Hence, we expect the work orders to proceed accordingly.

• On the flipside, construction margins are expected to be impacted, in view of the surge in building material prices in recent months. Moving forward, its outstanding construction orderbook of RM147.6m, comprising RM109.1m from the construction segment and RM38.5m from the engineering services segment will sustain earnings visibility over the next year.

• Elsewhere, we note that AME has submitted all relevant documents and consultations to the Securities Commission in regards to the industrial REIT spinoff, pending review. The move is expected to take place sometime at end-2021, subject to the progress of approvals.

• Meanwhile, AME has recently announced a proposal of bonus issue of 1 bonus share for every 2 AME shares held on an entitlement date and 1 free warrant for every 3 existing AME shares held on the entitlement date. The move is to reward existing shareholders as well as enhance the trading liquidity. Also, AME has proposed for an establishment of an employees' share option scheme of up to 10.0% of the total number of issued shares of AME.

Valuation & Recommendation

• We maintained our earnings forecast and HOLD recommendation on AME, but a higher target price of RM2.57 (from RM2.25). Our target price is derived by ascribing a higher target PER of 16.0x (previously 14.0x) to its FY22f EPS of 16.1 sen. The upward revision is backed by the improving outlook and also slightly above the small-mid cap construction peers trading at 11.0-15.0x, premised to AME’s position as a niche construction player, specialising in the industrial REIT space.

• Risks to our recommendation and target price include dependence on the foreign direct investment in Malaysia. A change in government policy that is unfavourable to foreign investors will hinder the sales of their units in the industrial park. Failure to meet targeted orderbook replenishment may derail the prospect of earnings growth.

Source: Mplus Research - 3 Jun 2021