• AME Elite’s (AME) 6MFY25 results are deemed in line with expectations

• Stronger sequential 2HFY25 earnings to be lifted by recognition of RM210m data centre land sale

• Maintain BUY with unchanged SOP-derived TP of RM2.10

Expect stronger sequential earnings

AME posted 6MFY25 revenue and core net profit of RM330m (-28% YoY) and RM38m (-27% YoY), respectively. Revenue slipped due to weaker contributions from property development (-53% YoY), offsetting the stronger engineering (+48% YoY) and property investment (+15% YoY) revenue. The 6MFY25 EBITDA margin improved 1ppts YoY to 20.2% on favourable revenue mix and margin improvements in construction (+5ppts) and property development (+2ppts) segments. 6MFY25 results accounted for 21% of our forecasts and 22% of the street’s expectations, respectively. We deem results to be in line with expectations, as we anticipate lumpy earnings recognition in 3QFY25 due to the RM210m land sale to Quantum DC. AME declared an interim DPS of 3sen, and on track to achieve our 6sen assumption.

Raising the bar on more robust demand

Sequential 2QFY25 revenue rose to RM187m (+32% QoQ), driven by strong growth in construction (+70%), property development (+22%), and engineering (+16%) segments. EBITDA margin rose 1ppts QoQ on improved construction margins (+6ppts) from newer projects. 2QFY25 posted a core net profit of RM23m (+59% QoQ) on the back of higher revenue and margin improvements. With RM359m property sales recognised in 6MFY25, AME has achieved 90% of its initial RM400m sales target and revised it upwards to RM550m (+38% increase). We expect the healthy unbilled property sales of RM459m and the remaining construction order book of RM148mn to sustain a stronger 2HFY25 earnings outlook.

Maintain BUY with TP of RM2.10

We make no changes to our earnings forecast and maintain our BUY rating and SOP-derived TP of RM2.10. We continue to like AME for its presence in high-demand FDI hotspots in Johor. Key risks are higher building material prices and stiff competition within the industrial property sector.

Source: Philip Capital Research - 2 Dec 2024