AFFIN Hwang Research has reiterated its buy call on AME Elite Consortium Bhd and lifted its 12-month target price (TP) to RM1.84 from RM1.52, based on a lower 40% discount to revised net asset value (RNAV).
In a note on April 24, the research house said the 40% discount to RNAV applied to AME is higher than its construction sector average of 32% currently, given AME’s relatively smaller size.
“This is in line with the construction sector’s average share price discount to RNAV narrowing to 32% from 38% over the past month.
“We lifted our RNAV/share estimate marginally to RM3.07 from RM3.05 previously to reflect the estimated fair-value gain of RM6 mil to RM8 mil for AME new factory investment property and land bank,” it said.
Affin Hwang believed the current CY20 price-to-earnings ratio (PER) of 12x is attractive compared to the construction sector weighted-average PER (excluding Gamuda Bhd, IJM Corporation Bhd, MRCB Resources Corporation Bhd) of 15x.
“AME is one of our top small-cap picks as it is a beneficiary of robust demand for industrial properties in Malaysia.
“We believe AME’s construction business is more resilient in the current cyclical downturn as it does not rely on government projects. It has a niche in industrial building construction and the
expertise to build large manufacturing plants.”
Despite the Movement Control Order (MCO), the research house said AME has been able to close new property sales through alternative channels.
It is exploring opportunities to expand its land bank in Johor given its low net gearing of 20% at end-2019. AME continues to see enquiries for potential sales at i-Park.
At 10.25am, the counter was trading at RM1.51, down two sen from yesterday’s close, giving the company a market capitalisation of RM4.72 bil. — April 24, 2020
