CIMB Research retains add for AWC, TP RM1.26

AWC also highlighted plans to use Trackworks as a platform to venture into rail asset management.

KUALA LUMPUR: CIMB Equities Research has retained its add call for AWC with an unchanged target price of RM1.26, which is 80.6% above Monday's closing price of 70 sen.

It said on Tuesday AWC's 9MFY6/19 core net profit of RM20.8mil was within its expectations.

“The 11.6% on-year growth in 3QFY19 core net profit was mainly attributable to higher contributions from its rail segment,” it said.

AWC's 9MFY6/19 revenue grew to RM243.3m (+16% on-year), thanks to higher contributions from the facilities, environment and rail divisions.

The 9MFY19 Ebitda margin also improved 1.4% pt on-year to 14.7%, due to higher economies of scale and better contributions from higher-margin segments (environment and rail). 

Accordingly, 9MFY19 core net profit rose to RM20.8m (+31.9% on-year), further aided by lower tax rates (-1.4% pt on-year). The 9MFY19 core net profit was in line, at 72.8% of our and 74.8% of consensus’ FY19 estimates.

CIMB Research said on a on-quarter basis, 3QFY18 revenue rose 3.4% while core net profit surged 10.4% to RM6.7mil. This was after adjusting for one-off losses of RM800,000 from unbudgeted outlays in the facilities division post completion of a non-concession contract. 

The stronger on-quarter performance in 3QFY19 was due to: i) higher contributions from all divisions (engineering, environment and rail) except facilities, and ii) better overall cost control. 

For 9MFY19, the facilities division continued to be AWC’s most profitable segment, contributing a core PBT of RM15.1m (+3.1% on-year). 

This was supported by new non-concession facilities projects and recognition of critical asset refurbishment programme. Due to higher progress billings, both the environment and engineering divisions recorded stronger 9MFY19 PBT of RM9.7m (20.2% on-year) and RM4m (12.4% on-year), respectively.

“At of 31 Mar 19, we gather that AWC’s total outstanding orderbook stood at about RM1.03bn. A large portion of this orderbook is made up of contracts in the facilities division amounting to RM627.1m (60.7% of total orderbook). This is followed by environment at RM161.2m (15.6%), engineering at RM154.6m (15%) and rail at RM79.7m (8.6%).

“We remain positive on AWC for its: i) defensive earnings, especially from facilities division, ii) undemanding valuation of 6.2x CY20F P/E, and iii) healthy balance sheet (3QFY19: net cash of RM40.8m),” it said.