• Maintain BUY, with new MYR2.15 TP from MYR2.05, 21% upside and c.5% FY25F (Mar) yield. We continue to like AME Elite Consortium as a key industrial play in Iskandar Malaysia. The disposal of 34.91 acres of industrial land at an ASP of MYR138 psf is another record high price in Nusajaya. The MYR85.1m net gain should boost FY25F earnings, providing upside to DPS while upcoming land acquisition will be a key re-rating catalyst. Given the robust demand for industrial land and development in Iskandar Malaysia, we now value AME based on a 15% discount to RNAV (from 20%).

• Land sale – a normal course of business. The transaction marks AME’s first deal in the data centre segment. The sale of 34.91 acres of freehold industrial land in AME’s i-TechValley to Digital Hypersapce Malaysia (DHM) is for a total consideration of MYR209.84m. This translates to MYR138 psf, considered a record high as the disposal is on a “as is where is” basis (vs an ASP of MYR85-90 psf to a manufacturer). Recall, Crescendo Corp (CCDO MK, NR) sold some parcels of land in Nusa Cemerlang Industrial Park to data centre users/operators at MYR120-125 psf in November last year.

• Net gain to boost FY25F earnings. The disposal, which is expected to be completed in 4QFY25, will yield a net gain of MYR85.1m, almost doubling our initial earnings forecast for FY25. Based on our new profit forecast and a dividend payout of about 30%, our FY25F DPS is now raised to 8 sen.

• The significance of the deal. DHM is a wholly-owned subsidiary of Quantum DC (HK) Ltd. DHM is involved in providing infrastructure for hosting, and data processing activities. Given the land size, we believe the capacity of this data centre could be quite big. We understand that the demand from data centres is still rather robust, and given the existing clusters in Nusajaya, Sedenak and Kulai, some have already started looking at suitable areas in Tebrau and Ulu Tiram. The high land price paid by these data centres also indicate that these foreign technology/telecommunication giants are eager to expand their presence in the South-East Asian region.

• New landbank – a key re-rating catalyst. Management is currently in negotiation for some new land acquisitions. If strategic land deals materialise, this should be the next re-rating catalyst for the stock given the potential upside to our RNAV estimate. New land addition is crucial as AME is depleting its landbank in Iskandar Malaysia given the strong deal momentum. With the upcoming detailed announcement of the Johor-Singapore Special Economic Zone (JS-SEZ), we think the demand for industrial land and developments would be even stronger due to higher foreign and domestic direct investments.

• ESG. Our TP includes a 2% ESG premium based on AME’s ESG score of 3.1.

Source: RHB Research - 14 May 2024