• Maintain BUY, TP rises to MYR2.05 from MYR2.00, 15% upside with c.2% FY24F (Mar) yield. AME Elite Consortium remains our pick for a key industrial play in Iskandar Malaysia. Earnings growth in FY25-26F is likely to be driven by: i) The conversion of MYR282m worth of bookings into contractual sales, and possibly at higher margins; ii) asset monetisation, which will ease cash flow; iii) the maiden launch of its new industrial park in Penang in 2H24; and iv) new landbank in Johor, which should help sustain long-term growth. We nudge up our TP after updating our RNAV estimate.

• Potentially higher margin from MYR282m worth of bookings in hand. Having achieved MYR175m in new sales for 9MFY24, AME still has MYR282m worth of bookings in the pipeline. Depending on the timing of conversion, the deals may be sealed in the coming months. We believe the profit margins from these recent deals, which are largely located at i-TechValley, may be rather lucrative – given the escalating industrial land prices in Johor, driven by the influx of foreign direct investments.

• Soft launch of Penang industrial park in 2H24. AME’s 175-acre industrial park in Penang will have its soft launch in 2H24. About MYR100m (for the JV) is budgeted for the ground works as well as the infrastructure, on which construction should start in next quarter. Interest in its maiden industrial park in Penang should be strong – given the company’s track record in Johor, and due to Penang being a reputable E&E manufacturing hub. Management is confident on attracting some companies from ancillary industries of its current clientele to set up their plants there.

• Accumulating industrial assets to inject into REIT. Some industrial assets are expected to be injected into AME REIT (AMEREIT MK, BUY, TP: MYR1.42) in 2H24. The proceeds from this asset monetisation exercise should help enlarge AME’s war chest for landbanking. In the pipeline, the new worker dormitory at i-TechValley is scheduled for completion in 1H25. It will add another 2,683 beds to the current 6,407 bed capacity, potentially providing MYR9m in rental revenue to the company. This should also underpin the longer-term inorganic growth of AME REIT.

• Expect new land acquisitions to come soon. AME has 135 acres left at i-TechValley, and its remaining land at other i-Parks in Johor is also depleting. Management hinted that some negotiations are ongoing, and we expect new land acquisitions to be announced in the coming quarters. This should be a strong share price catalyst – especially when investment interest in Johor is strong, and the upcoming Johor-Singapore special economic zone should continue to drive investments from Singapore over the longer term.

Source: RHB Research - 6 Mar 2024