Summary

• AME Elite Consortium Bhd's 1QFY24 core net profit surged 282.4% YoY to RM23.3m, driven by the higher contributions from property development, engineering services, property investment and management services segment, as well as stronger recognition from the share of profit from the equity accounted joint ventures. Revenue for the quarter added 62.5% YoY to RM222.5m.

• The reported core net profit amounted to 34.9% of our expectations of RM66.7m and 35.8% of consensus expectations of RM65.0m. The better-than-expected results were mainly due to the strong contribution from the property development segment.

• We gather that AME is equipped with an outstanding construction & engineering orderbook of RM138.3m that will sustain earnings visibility for the next 2 years. After achieving a record-breaking new sales performance of RM479.2m in FY23, AME delivered new property sales at RM105.8m during the quarter. Moving forward, unbilled property sales at RM253.5m (slightly lower against RM351.3m registered in 3QFY23) will sustain the property development segment earnings for 2 years.

• Looking ahead, AME will be kept busy with the on-going industrial park developments with a balance GDV of more than RM1.00bn to sustain long term revenue visibility till 2030. The development of i-TechValley industrial park and the impending commencement of i-Park @ Senai Airport City (Phase 3) will support the long-term prospects. In addition, AME is undertaking further landbanking activities in Penang that sits on 176-ac of land through a joint development. The exercise that is target for completion in 2024 will generate potential GDV of RM1.00bn.

• Meanwhile, the construction of the first dormitory for i-TechValley at SILC, will bring additional capacity of 2,683 beds. Construction has commenced in the previous quarter and is slated for completion in 2H24. We expect take-up rates to remain favourable (>90%) that is similar to current i-Stay dormitories.

• We continue to favour AME that is well positioned to drawing global entrants into their industrial parks as multinational companies expands their supply chain into the Southeast Asia market. Already in 1Q23, Malaysia’s foreign direct investment stood at RM37.5bn.

Valuation & Recommendation

• While the reported earnings came above expectations and outlook will be sustained by the expansion of i-Parks, we are ceasing coverage on AME due to the relocation of internal resources. Our last recommendation was BUY with a fair value 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-to-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.

Source: Mplus Research - 25 Aug 2023