Summary

• AME Elite Consortium Bhd's 4QFY23 core net profit fell 10.5% YoY to RM21.6m,  following the divestment of 49.0% stake in AME REIT for the latter’s listing process.  Revenue for the quarter. However, improved 13.4% YoY to RM158.4m. A single-tier  interim dividend of 3.0 sen per share was declared, payable on 7th July 2023.

• For FY23, cumulative core net profit gained 49.6% YoY to RM77.6m; amounted to  94.7% of our expectations of RM81.9m and 107.3% of consensus expectations of  RM72.3m. With economic activities gathering pace and demand for industrial  properties staying firm, we reckon AME may continue to thrive moving into FY24.

• Moving forward, AME is equipped with an outstanding construction orderbook of  RM173.0m to sustain earnings visibility for the next 2 years. For FY23, new property  sales recorded at RM479.2m, which has largely surpassed FY22 sales of  RM168.4m. Unbilled property sales at c. RM351.3m (up from RM273.0m in  3QFY23) will sustain the property development segment earnings for 2 years.

• We expect AME will be kept busy with the on-going industrial park developments  with a balance GDV of RM1.52bn to sustain long term revenue visibility till 2030. As  of FY23, AME is equipped with a sizeable war chest of RM313.0m that can be  utilised for future landbanking activities.

• With the existing workers’ dormitories close to full taken up conditions, AME will be  embarking onto the construction of new dormitory at i-Techvalley@SiLC with a  capacity of 2,688 beds. The aforementioned project is expected to commence construction in 2Q23 and is expected to be completed in 2H24 and will bring total  number of beds for workers’ dormitories at c. 9,095 beds.

• In 1Q23, Malaysia’s FDI stood at RM12.0bn (the smallest amount since 3Q21) as  foreign investors pulled the handbrake following the rising operational cost pressure and concern over the rising risk of recession. Still, we expect the foreign direct investment (FDI) for the rest of the year to remain sturdy, anchored by the  MoU from Chinese entities to commit and investment of RM170.0bn that was inked on 11th April 2023.

Valuation & Recommendation

• Despite the reported earnings came in slightly below expectations, we made no changes to our earnings forecast as we reckon that earnings growth in coming years will be backed by the robust industrial property sales. Consequently, we  maintained BUY on AME, with an unchanged target price of RM1.87.

• Our target price is derived by ascribing a target PER of 18.0x to its FY24f EPS of  10.4 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 - 29 May 2023