• Maintain BUY and MYR2.00 TP, 20% upside and c.2% FY25F (Mar) yield. 3QFY24 earnings beat expectations. Although sequential revenue was down, earnings were lifted by the disposal of an industrial property to AME REIT (AMEREIT MK, NEUTRAL, TP: MYR1.42). Bookings in the pipeline are encouraging. We believe AME Elite Consortium is a beneficiary given the influx of foreign direct investments into the Johor region. Upcoming land acquisitions should lead to potential upside in our RNAV estimate. The recent weakness in share price represents a good opportunity for investors to enter.

• 3QFY24 results. Sequential revenue was lower as more projects progressed towards the completion stage in 2QFY24. Despite the drop in revenue, EBIT was largely flat QoQ as the quarter saw the recognition of a fair value gain of MYR13.12m arising from the sale of an industrial property to AMEREIT. The property was initially classified as inventory. However, upon the sale to the REIT, the property was then reclassified as an investment property, with the fair value gain recognised. Also, as a result of the disposal, EBIT margin was higher at 22.7% vs 16.7% in 2QFY24.

• YoY comparison. Note, 9MFY23 earnings were much higher due to MYR54.8m fair value gain as a result of the sale of 10 plots of industrial properties to AMEREIT during the financial year.

• MYR350m sales target should be on track. New sales achieved MYR40.4m vs MYR88.5m in 2QFY24, bringing 9MFY24 total to MYR175m. Management guided that it has secured more than MYR450m worth of new property sales and bookings in AME’s industrial parks for 9MFY24, which means MYR275m is expected to be sealed in the coming months. Depending on the timing, the company should be on track to achieve its MYR350m sales target by end FY24.

• Forecasts. We raise our FY24-26F earnings by 14-15% in view of the strong deal flows. Unbilled sales and outstanding construction & engineering orderbook fell to MYR159.2m and MYR199.8m, from MYR203.9m and MYR259m 2QFY24. Demand for industrial land and properties in Johor has picked up significantly driven by the influx of foreign direct investments in Iskandar Malaysia. Good infrastructure as well as close proximity to Singapore have been the key attractions.

• Maintain TP. Our TP is based on a 20% discount to RNAV and 2% ESG premium given our ESG score of 3.1 for the company.

Source: RHB Research - 29 Feb 2024