RHB Research maintained its buy call on AME Elite Consortium at a target price of RM2.34, 21% upside with 2% FY22F yield.
The decision is partly due to AME entering into a heads of agreement (HOA) with UEM Sunrise to acquire 169.8 acres of freehold industrial land in Nusajaya for a total purchase consideration of RM434.3 mil.
Management indicated that the acquisition will be funded via part of its IPO proceeds, as well as bank borrowings.
The group allocated RM69 mil for landbanking activities during the IPO in the end of 2019.
“We are positive on AME Elite Consortium’s proposal to acquire land in Nusajaya. It is in line with our expectation, as it has only 106 acres left for development,” RHB Research analyst Loong Kok Wen said in a note today.
For its first quarter ended June 30, 2020 (3Q20), the group had a slight decline in profit to RM5.3 mil from its previous RM13.1 mil in 3Q19, while its revenue recorded RM54.7 mil in revenue from 3Q19’s RM94.3 mil.
The purchase consideration translates to a land cost of RM58.70 per sq ft, which is in line with the previous selling prices for Phase 1 and 2 of the Southern Industrial & Logistics Clusters (SiLC) a few years ago, where the new land is located.
“Apart from strong deal flows, development expansion in the Klang Valley as well as the listing of industrial properties as a REIT should be key share price drivers,” Loong added.
She also said the research house is not making any changes in its earnings forecasts, pending management’s guidance on the potential gross development value (GDV) of the land and target customers.
“Both AME and UEM Sunrise are expected to officially sign the sales and purchase agreement within a month. We will then make necessary adjustments to our forecast and valuations,” she added.
As of 10.10am today, AME Elite Consortium Bhd’s share price increased 0.52% to RM1.95 with a market capitalisation of RM832.87 mil. – Oct 12, 2020
