KUALA LUMPUR (April 3): AME Elite Consortium Bhd's potential sales are likely to be realised, albeit at a later stage due to COVID-19.
Affin Hwang Capital Research said in a note that the construction company had indicated it had four new customers from China that were interested in setting up manufacturing plants in i-Park @ Indahpura.
However, travel restrictions placed by the government led to a delay in signing the sales and purchase agreements for land sales.
“Hence, this will adversely affect property sales in the fourth quarter ended March 31, 2020 (4QFY20). But we gather that the potential sales will go ahead and the delay in completing the sales only represents a timing difference in sales recognition. Hence, we expect core net profit to fall 32% quarter-on-quarter (q-o-q) to RM11 million in 4QFY20,” the research house said.
The research house added that AME is seeing higher demand for its purchase and lease industrial properties in i-Park @ Indahpura and i-Park @ Senai Airport City (SAC) from foreign firms based in China, Singapore, Australia, Hong Kong, Japan and the US.
As it stands, its construction orderbook of RM349 million and unbilled property sales of RM121 million will beef up FY21 earnings. However, its earnings growth is contingent on the success rate of its RM470 million in current tenders and sales of its remaining property gross development value of RM1.5 billion.
A Singapore-based pharmaceutical company has agreed to set up a large manufacturing plant on a seven-acre site at i-Park @ SAC. As such, given the rising demand for gated and guarded industrial properties, AME is exploring potential joint-venture opportunities with landowners to develop i-Park industrial parks in Penang and Selangor.
“We assume new contract wins of RM427 million/100 million/100 million and property sales of RM140 million/100 million/140 million in our FY20/21/22E earnings. We believe AME is relatively more resilient in replenishing its order book and sustaining property sales due to robust industrial property demand. Maintain 'buy',” the research house said while maintaining its target price of RM1.52 on the counter.
At 9:24am, shares in AME were trading 0.77% or a sen lower at RM1.29, giving it a market capitalisation of RM555.25 million.
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