• Maintain BUY, TP rises to MYR2.00 from MYR1.82, 29% upside withc.2% FY24F (Mar) yield. The recent transacted industrial land price ofMYR120-125 psf indicates that there is an attractive upside to AME EliteConsortium’s remaining GDV for its industrial projects in Iskandar Malaysia.The transacted price also implies that the demand for industrial landremains robust, and the influx of investments is supporting a RNAV re-rating– particularly for developers that own strategic landbanks.

• Recent land transactions by other players set a new benchmark. Overthe last two weeks, Johor-based Crescendo Corp (CCDO MK, NR)announced three major land disposals spanning a total of 103 acres atMYR120-125 psf. These parcels are freehold industrial land in the vicinityof Crescendo’s Nusa Cemerlang Industrial Park (NCIP).

• Active industrial land transactions in Johor a reflection of influx ofinvestments. It is worth noting that the three buyers for the land parcelssold by Crescendo Corp are STT GDC M (whose parent company is basedin Singapore), Yu Ao (a subsidiary of Epoch Digital in Singapore) andMicrosoft Payments (a subsidiary of Microsoft Ireland Operations). All thepurchasers are mainly involved in data processing activities and/or datacentre facilities. Unlike the previous upcycle in Iskandar Malaysia, the slewof land transactions this time round was mainly done for industrial purposes– a sector that brings in real investments with a multiplier effect toconstruction and services industries.

• At least 10% potential upside for AME’s GDV. AME’s i-TechValley is nearNCIP, and both are located along the Second Link Expressway. AME hasa remaining landbank of c.160 acres in i-TechValley, and we understandthat the land is now marketed at MYR80-85psf to its recent clients. Giventhe new transacted price at NCIP, we see a potential upside of at least 10%to its remaining GDV of MYR1.17bn for i-TechValley. At a land price ofMYR88-93 psf, this is still at a 22% discount to the price at NCIP.

• War chest for landbanking. The potential addition of new land, especiallyin Johor, could be a share price catalyst as AME has been anchoring theindustrial sector in Iskandar Malaysia. It has a war chest of about MYR180mpost listing of AME REIT (AMEREIT, BUY, TP: MYR1.42).

• Higher TP. We raise AME’s estimated GDV for all its industrial projects inJohor by 10-12% on average, to reflect the updated market price forindustrial land plots. We also narrow our discount to RNAV to 20% (from25%), given the prevailing strong demand for industrial properties, as wellas the upcoming catalyst for the Johor-Singapore special economic zone,which is expected to drive industrial activities further. Our new TPincorporates a 2% ESG premium, as our ESG score of 3.1 out of 4 for thecompany is a notch above the country mean.

Source: RHB Securities Research - 20 Nov 2023