Results

• AME recorded 4QFY21 core earnings of RM21.1m (after excluding its fair value gain on investment properties net of tax and MI of RM1.7m), which surged strongly by 115.3% yoy and 80.3% qoq.

• FY21 exceeding our expectation. The Group chalked up RM49.5m core net profit for its full year FY21 result (-7.5% yoy), exceeding our estimate by 14.6%. The better-than expected result was due to faster-than-expected progress billings for its Property Development segment, mainly contributed by its EMS client in Johor.

Comment

• Stellar 4Q results underpinned by Construction, Property Development and Engineering segments. AME achieved commendable 4QFY21 thanks to better showings posted by its Construction (segmental revenue: +31.0% yoy and +11.0% qoq; segmental profit: +114.3% yoy and +106.9% qoq), Property Development (segmental revenue: +272.6% yoy and 75.4% qoq; segmental profit: +93.0% yoy and +38.4% qoq) as well as turnaround of its Engineering division (4QFY21 segmental profit of RM2.5m vs loss of RM0.1m in a year ago and further strengthened 38.9% qoq).
• Softer FY21. However, the Group’s full year FY21 result was weaker yoy as impacted by the MCO which caused temporary disruption on its projects progress especially for its Construction (segmental profit slid 39.1% yoy) and Engineering (segmental profit tumbled 75.5% yoy) divisions, coupled with lower project margin and lower share of JV profit, -34.0% yoy (i.e. i-Park@Indahpura, Phase 3 project). Also, the higher effective tax rate (FY21: 27.3% vs FY20: 22.5%) weighed on AME’s overall yearly performance.
• Resilient orderbook….. AME has an outstanding orderbook of RM147.6m of construction and engineering works as of 4QFY21. The Group has successfully clinched RM65.2m worth of jobs during FY21, falling short of its target orderbook of RM136m for FY21. However, the Group envisages to clinch RM44.3m worth of construction and engineering works in the near future.

• ……and unbilled sales. Property development wise, AME has chalked up RM140.3m new sales for its industrial properties in FY21. Still, management is sanguine on its sales prospects as it has secured RM107.8m bookings in 4QFY21 (FY21 sales target of RM200m). Meanwhile, the Group boasts RM64.3m unbilled sales as of 4QFY21 which render earnings visibility for the next 6 months.

• Anticipating better FY22F. AME has secured substantial investments from several multinational companies with local presence at the beginning of FY22 to build their industrial facilities in its i-Parks, and the Group continues to receive inquiries about its i-Park industrial properties from several prospective customers. Moving forward, the Group will continue developing i-Park@Senai Airport City (Phase 3) and expanding its construction and property development segments to improve the Group’s bottom line.

• Interim dividend of 4.0 sen/share. The Group has declared an interim dividend of 4.0 sen/share for its FY21 with ex-date on 16 June. This translates into a dividend yield of 1.7% based on last closing price.

• Proposed bonus issue and free warrant. On a separate announcement, AME has proposed 1-for-2 bonus issue together with 1-for-3 free warrants. This is to reward its shareholders and further improve its share liquidity.

Earnings Outlook/Revision

• We lift our FY22F core net earnings marginally by 4.9% to RM58.3m from RM55.6m after increasing our progress billings for Property Development and Engineering margin. We also take this opportunity to introduce our FY23F core profit of RM71.9m. Our FY22F and FY23F core earnings estimates represent yoy growth of 17.8% and 19.2% respectively.

Valuation & Recommendation

• Maintain BUY on AME with a higher target price of RM2.53 (previously RM2.41) after our earnings upgrade. Our revised target price is pegged at PE of 18.5x FY22F core EPS which is in line with upcycle valuations of large-cap construction players.

• We like the stock for its: 1) potential landbanking in Klang Valley, 2) potential listing of industrial REIT in the medium term with asset size of around RM500- 600m which includes i-Park (leasing of industrial properties) and i-Stay (worker dormitories); and 3) unique busines model which is relatively unfazed by prevailing pandemic and economic downturn.

Source: JF Apex Securities Research - 28 May 2021