We are optimistic on AHB Holdings Bhd (“AHB”) growth story as their latest products namely “Covid Panels” and “SpaceCom Medical Hubs” are set to benefit from the new normal within the office space and medical hubs. The company is likely to achieve record earnings in FY21 as demand for these products is set to swell since we are entering into the Covid-19 prevention era. BUY with a target price of RM0.61 premised on 17x PER FY21 as per the average of its closest related peers which is lower than its 2-year historical average at 32x. Though our valuation may be at a premium to Bursa Malaysia Small Cap Index of 14x PER, we believe this is justified given AHB is at an inflexion point at the moment.

AHB is an integrated system company office furnishing for the premium segment under the Artwright brand and was listed on the Bursa Malaysia in 1996. AHB’s major list of clients includes global MNCs, international financial institutions and GLCs which reinforces their reputation for design and quality as evidenced by their awards from Matrade, Archidex, MIID REKA Design Excellence Awards to name a few.

AHB has recently raised RM5m from a private placement exercise to strengthen its balance sheet and planned capex to capture new markets with their new products namely Covid Panels which are basically glass panel separators in the office space and is seeing strong interest as more workers are gradually returning to their offices. Working from home (“WFH”) is also becoming a new normal and AHB has positioned itself with their affordable range of SpaceCom WFH office furniture for easy assembly to capture this growing segment locally and overseas. AHB has also introduced and patented their mobile medical hubs which are specifically designed for infectious disease as they are constructed with negative pressure anti-virus HEPA filtration and ventilation systems which could be sold to hospitals locally and overseas. However, management have yet to provide any earnings guidance from this segment thus is not included in our earnings forecast.

Balance sheet has improved from their recent private placement and is now in net cash position. Net margin is expected to improve to 13% by FY21 anchored by its on-going RM9m projects plus tenderbook of RM100m where management is confident in securing over half of it.

Source: Rakuten Research - 1 Sept 2020