Summary

• AME Elite Consortium Bhd's 4QFY22 core net profit fell 39.1% YoY to RM13.9m, dragged down by the timing of income recognition and lower progress of work completed under the property development segment. Revenue for the quarter declined 14.4% YoY to RM139.7m. A single tier interim dividend of 2.5 sen per share, payable on 7th July 2022 was declared.

• For FY22, cumulative core net profit decreased 23.9% YoY to RM41.6m. Revenue for the year contracted 13.5% YoY to RM398.4m. The reported core net profit accounts to 105.6% of our expectations of RM39.3m and 81.5% of consensus forecast of RM51.0m.

• Moving into the next financial year (FY32f), we reckon a recovery is largely on table following the re-opening of borders, which could potentially speed up the industrial property sales progress from international companies and construction work progress may also accelerate. With Malaysia having transitioned into the endemic phase, we foresee no major foreclosure of site works.

• As of end-FY22, AME is equipped with an unbilled construction orderbook of close to RM400.0m that will sustain earnings visibility for the construction segment over the next 2 years. We have penciled in an orderbook replenishment of RM300.0m for FY23f. Meanwhile, AME’s unbilled property sales of RM91.3m will sustain the property development segment earnings over the foreseeable future.

• Take-up rate for i-Park industrial properties may gather pace in subsequent quarters, premised to the potential reopening of national borders as enquiries from overseas are still robust. We gather that AME has also recently commenced the development of new industrial park, namely i-TechValley at Southern Industrial and Logistics Clusters (SiLC), Johor Bahru that will generate a total gross development value of more RM1.50bn.

• On the proposed REIT listing tentatively in 2QFY23, we note that relevant authorities in the Securities Commission have granted I REIT Managers, a Capital Markets Services Licence for the regulated activity of fund management in relation to asset management restricted to real estate investment trusts on 23rd May 2022.

Valuation & Recommendation

• Although the reported earnings came slightly above expectations, we made no changes to our earnings forecast for both FY23f and FY24f as recovery in coming financial year is deemed to be largely in place. Consequently, we maintained HOLD on AME, with an unchanged target price of RM1.65.
• Our target price is derived by ascribing a target PER of 18.0x to its FY23f EPS of 9.1 sen. The assigned PER is slightly above the small-mid cap construction peers trading at 13.0-15.0x, premised to AME’s position as a niche construction player, specialising in the industrial REIT space.
• Risks to our recommendation and target price include dependency on the foreign direct investment in Malaysia. Weaker-than-expected orderbook replenishment or slower-than-expected industrial property sales may hamper the prospect of earnings recovery.

Source: Mplus Research - 27 May 2022