• We expect strong earnings momentum in 4Q24 and 2025, driven by positive aerospace and All-Link outlook
• Strong pipeline of new customers, if secured, could serve strong re-rating catalyst
• Maintain BUY rating and target price of RM0.84

Positive on 2025 outlook

Management expressed strong confidence in the 2025 outlook, driven by positive prospects of its aerospace segment and All-Link. The aerospace segment is expected to see strong revenue growth, thanks to a newly secured Philippines customer and the recent expansion of hangar capacity at Asia Digital Engineering (ADE; the Capital A MRO arm). AGX has been handling the trial shipment for this new Philippines customer and will officially handle their logistics starting in 2025. Furthermore, management is seeing a significant increase in aircraft maintenance volume for ADE following the operation of the new 14-line hangar in Sept24. ADE’s CEO, Mahesh Kumar, is optimistic about doubling revenue in 2025, pointing out that the new hangar is fully booked for 2025, further validating its outlook. AGX has the competitive edge as the preferred logistics provider handling the bulk of ADE’s volume. Additionally, with the major customer secured in 2024, All-Link benefits from the global e- commerce boom.

Potential new customers on the horizon as catalyst

AGX is actively pursuing a few major airlines’ customers in Malaysia and globally. AGX is looking to secure a significant MRO logistic contract with a major local airline company. We understand that this airline’s potential aircraft maintenance volume could be comparable to that of the current volume by ADE. Given that AGX already provides aircraft-on-ground (AOG) services for this airline, we see a strong likelihood of securing the contract. With the intensifying global trade tension, we believe AGX, through its partnership with All-Link, will benefit from ongoing global trade diversification, leading to higher shipment volume.

Maintain BUY with RM0.84 target price

We reiterate our BUY rating and RM0.84 target price, based on a target 15x PE multiple on 2025E EPS. We like AGX for its niche exposure in the aerospace business, riding on ADE's ambitious growth prospects, and benefiting from global trade tension. Key risks to our BUY call include weaker-than-expected volume growth, lower-than-expected contribution from All-Link, and a sharp decline in freight rates.

Source: Philip Capital Research - 15 Jan 2025