AME Elite’s 3QFY20 results were within our expectations. Net profit jumped 55% yoy to RM49m in 9MFY20, driven by higher earnings for all divisions and a RM7.3m fair-value gain on its investment properties. This was partly offset by RM2.9m listing expenses incurred in 2QFY20 and 3QFY20. Core net profit increased 42% yoy to RM44.6m in 9MFY20. We reiterate our BUY call with a 12-month TP of 2.28, based on a 30% discount to our RNAV.

Strong Earnings Momentum

Net profit of RM49m in 9MFY20 comprises 76% of our full-year forecast of RM64.1m. There was a RM7.3m fair-value gain on its investment properties and listing expenses of RM2.9m, which we have assumed in our forecast. AME’s revenue grew 5% yoy to RM282.3m in 9MFY20, mainly driven by higher property development (+129% yoy), property investment (+62% yoy) and engineering services (+44% yoy) revenue. This was partly offset by lower construction revenue (-27% yoy) as some existing projects were near completion and new projects are still at initial stages. Core net profit jumped 42% yoy to RM44.6m in 9MFY20, driven by better performances and profit margins for all divisions. Sequentially, core net profit grew 13% qoq to RM16.7m in 3QFY20, mainly driven by higher construction (+77% qoq) and engineering services (+30% qoq) earnings.

High Order Book and Unbilled Sales

AME is seeing higher demand for its industrial properties (purchase and lease) in i-Park@Indahpura and i-Park@Senai Airport City (SAC) from foreign companies from China, Singapore, Australia, Hong Kong, Japan and the US. Its remaining construction order book of RM348.5m and property unbilled sales of RM121bn will sustain earnings growth ahead, in our view.

Commenced I-Park@SAC Phase 3

AME has commenced i-Park@SAC Phase 3 with gross development value of RM555m to meet rising demand. It is exploring land-banking opportunities to grow the i-Park brand industrial parks throughout Peninsular Malaysia.

Maintain BUY

We maintain our earnings forecasts and RNAV/share estimate of RM3.24. AME is one of our top construction sector small-cap BUYs with 12-month TP of RM2.28, based on a 30% discount to RNAV.

Source: Affin Hwang Research - 27 Feb 2020