Good day,

Peoples started to believed AWC berhad could done well going forward,after financial result regain momentum in past two year,as well as the recent completed aquisition of new subsidiarys with profit guarantee.

BUT,i am strongly believe the true potential of AWC has not been discover yet,otherwise there is no way to explain why  AWC only trade at 40cen per piece.

i had tracking AWC for more than 3 years time.when i first look into the stock,things doesn't seems attractive due to the weak earning,even thier had very unique businesses model and huge cash pile.

even after commendable result was achieved in past two year,i am maintain cautiously optimistic stance,until FY2015 annual report is released,together with all the recent development,i am now super optimistic toward AWC,due to reasons as below:

1.)New concession with higher rate might sign soon.

under facilities division,AWC provided facilities management services to all government's buildings in four states,the concession is currently under interim extension,and already obtain approval for further extent from government in principal, official signing of new concession might take place year end or early next year.

according to management,services to government still charge at old rate,effective since 2001, for now, but after the new concession is sign,new rate will be executed,this is expect to improve revenue further.

even we apply merely 2% increment(inflation effect) each year,new concession might contribute at less 30% more revenue than the old one,and even more meaningful contribution to margin and bottomline.

2.)More diverse income stream for facilities division.

in the past,AWC had heavilly rely on the government concession,but the things had changed.

in FY 2015,AWC able to secure few new contract for its facilities division,included Bank Negara Malaysia,Celcom,and Herriot Watt University,signifying management keep on their hard work to drove contribution from commercial segment, expand room for further growth.

3.)Environment division keep gaining strength.

During FY2015,STREAM Automated waste collection system(AWCS) continue to win new project domestically and singapore,included various property project like ICON RESIDENCE by mahsing,PUTERI HARBOUR by UEM,TROPEZ by tropicana,KL ECO CITY by SP setia and many more.

at singapore,AWC won the new terminal 4 in Changi airport,again,as well as maiden foray into Housing development board by securing tampines north residential project.Yes,bidding projects in singapore is not easy at all,but AWC did it again and again.

beyond that,AWC also awarded phase 2 works for in Al Raha Beach project in middle east,and won Cathay Pacific Catering Centre Phase 2 in hong kong,to implement AWCS.

the implementation of AWCS project will broaden AWC's recurring income base,thus we should see further and sustainable improvement from environment division,even the division already is the most profitable one.

4.)engineering division come back to life.

after acquired Qudo tech and DD technique in early october,engineering division should perform better starting from 2nd Q 2016FY(oct to dec 2015),cos vendor had guarantee net profit for the two company will not less than RM 3.9million in 2016 and 2017.

thats say,engineering division's contribution might triple up going forward,cos PBT for the division is only RM1.76Million in FY 2015.

CONCLUSION:

with all 3 division found their legs,AWC is expected to turn into high growth mode in years to come,the prospect is very promising and exciting.

as a result,it will be strange if AWC keep trading at 40 cen level,especially with net cash per share of 21cen.

concervatively,i assume facilities division achieve 30% profit growth with concession renewal and new commercial contribution,15% organic growth for environmental segment,and 100% increase in engineering division with contribution from new subsidary.

sum up all together,FY2016 PBT expected around RM20million.if 25% tax rate applied,AWC should record Net Profit of at less RM15 million,equal to EPS of 5.78cen with the enlarged paid up.

according,i am set target price for AWC at 57cen for now with upward bias,since i am not taking net cash and forex gain from strong sing dollar into consideration.

Written by,

SHERLOCK

8/11/2015