by S BIRRUNTHA / graphic by TMR
AME Elite Consortium Bhd continues to offer value over the longer term, leading JF Apex Securities Bhd to maintain its ‘Hold’ call on the company with an unchanged target price of RM1.85.
JF Apex head of research Lee Chung Cheng deems the stock as fully valued at present but favours the group over the long run due to its potential land banking in the Klang Valley.
He noted that potential upside from the listing of AME’s industrial Real Estate Investment Trust in the medium term with asset size of around RM500 million to RM600 million which includes i-Park (leasing of industrial properties) and i-Stay (worker dormitories).
Lee noted that the new building contract worth RM359 million secured by AME from Ye Chiu Non-Ferrous Metal (M) Sdn Bhd to construct a new integrated production facility, logistics warehouse and office building in Johor came in as a positive surprise.
“We are overwhelmed by this sizeable contract win as this is AME’s largest construction contract thus far. The project is for a duration of 18 months, commencing in early November 2021 and to be fully completed by early May 2023.
“The project is expected to contribute positively to the group’s topline and bottom line from financial year 2022 (FY22) till FY23,” Lee wrote in a report yesterday.
He added that assuming an operating margin of 11% (in view of rising raw material prices), AME could make some RM30 million in earnings with majority of the profit booked in FY23.
Under the contract, AME’s indirect wholly-owned subsidiary, AME Construction Sdn Bhd, will build four blocks of production facility with logistics warehouses together with offices and ancillary buildings with a total built-up area of 2.55 million sq ft at Tanjung Langsat Industrial Area in Pasir Gudang, Johor.
The new blocks will complement Ye Chiu’s existing production facility in the industrial area.
The project duration is expected to be about 18 months, commencing on Nov 3, 2021, and to be completed by May 2, 2023.
AME noted that the new job award underscores its ability to undertake construction for heavy industries and support the expansion of multinational companies in Malaysia.
Lee stated that although the new contract win by AME exceeds the research house assumption of
RM230 million worth of work orders for FY22, its property sales have yet to hit the research house forecast.
“Hence, we keep our net profit forecast of RM58.4 million for FY22 and RM69.5 million for FY23 at this point,” Lee wrote.
On its property development segment, Lee believes AME could achieve higher FY22 industrial property sales than FY21 sales of RM140.3 million and meet its target of RM200 to RM250 million with the reopening of inter-national borders insight.
Amid prevailing gloomy construction outlook, AME had successfully clinched RM403 million worth of jobs, which exceeded its target order book of RM150 million to RM200 million for FY22.
AME now boasts an outstanding orderbook of more than RM400 million of construction and engineering works.