KUALA LUMPUR: AWC Bhd
’s core net profit could grow by strong double digits over the next two years, underpinned by its property market, engineering, integrated facilities management (IFM) and rail segments.
Hong Leong Investment Bank (HLIB) Research projected AWC’s core net profit to expand at a strong compounded annual growth rate of 44% from financial year 2024 (FY24) to FY27.
“Anchored by four main pillars, we believe AWC is entering into a new earnings upcycle,” it said in a coverage initiation report.
HLIB Research stated that the property market in Malaysia and the strong housing pipeline in Singapore are expected to drive the growth in AWC’s environment segment.
Additionally, data centres could boost its engineering segment, while the IFM and rail segments will benefit from the renewal of existing contracts and the Penang light rail transit project, respectively.
The research house initiated its report with a “buy” rating on AWC and a target price of RM1.41 per share, based on a 14 times 2025 calendar year forward price-to-earnings ratio.
“The strategic stake increase in Stream Group Sdn Bhd to full ownership is deemed to be an earnings-accretive move for AWC, helping to position the group to capitalise on the growing demand for modern waste collection solutions.
“Stream, which commands some 90% market share in Malaysia, is well-placed to benefit from the country’s stronger property market outlook and anticipated rise in new launches, as well as Singapore’s robust pipeline of residential, office and HDB (Housing and Development Board) developments,” the research house stated in a report.
Stream, 100% owned by AWC, also has a presence in parts of the region and the Middle East.
HLIB Research expressed optimism that AWC could secure more contracts in the Middle East, capitalising on the region’s booming infrastructure sector.
Furthermore, AWC’s IFM and rail segments are expected to see the renewal of both concession and non-concession contracts, which are set to expire this year and the next.
“The renewal of these contracts are seen to significantly drive the profitability of its IFM segment, which has been eroded by cost escalation over the past three years.”
At the end of trading yesterday, AWC was 2.91% higher at RM1.06.
