PETALING JAYA: AGX Group Bhd
remains on a solid track for strategic growth, on the back of resilient intra-Asia trade exposure and easing inflationary pressures that buffer it from heightened geopolitical risks in Europe and the United States, says Mercury Securities.
However, it said that AGX’s recent share price re-rating has pushed valuations above comfortable levels.
“While AGX’s share price has moved above our target price of 56 sen, we maintain our ‘hold’ recommendation,” the research house added following the group’s latest corporate update.
“The recent rally appears valuation-driven, with the stock now trading at 15 times price-to-earnings ratio on financial year 2026 (FY26) earnings, representing a 50% premium to the transportation and logistics sector average.
“Upside therefore appears limited, as the recent rally has likely priced in these near-term growth expectations.”
It added that downside risks are also contained, given the group’s earnings visibility and regional exposure.
The research house noted that the group’s operating fundamentals show no signs of deterioration, while regional trade flows remain resilient, supported by supply-chain re-routing amid ongoing global geopolitical uncertainties.
“As such, we view the current valuation as stretched but not unjustified, pending further earnings delivery.”
AGX is an integrated third-party logistics service provider present in seven South-East Asian countries, as well as China and South Korea, with offerings encompassing air, sea, road, warehousing, and aerospace logistics.
Mercury Securities said it is cautiously optimistic on AGX based on its operating primarily in Asia Pacific and growing certainty in the regional economic conditions ahead.
Additionally, economic activity within South-East Asia remains supported by a relatively accommodative interest rate environment, which is conducive to trade financing, inventory replenishment, and consumer demand, thereby boosting logistics volumes.
“Coupled with AGX’s limited exposure to Europe–US trade lanes, this provides a stable demand backdrop and reinforces earnings visibility,” it added.
According to the research house, the group’s long term outlook is supported by its financial agility, with its asset-light business model that specialises in logistics coordination rather than owning vessels or aircraft, as well as its low gearing of 0.22 times and adequate liquidity.
It added that AGX’s key strength in aerospace logistics is poised to be a core growth and margin driver.
New airline customers in Vietnam and the expansion of supported aircraft fleets to 365 aircraft is expected to bring strong medium-term visibility for MRO (maintenance, repair and overhaul) and AOG (aircraft-on-ground) demand.
Furthermore, regional aviation recovery is projected to fuel earnings momentum for FY26, with management highlighting rising passenger traffic, fleet expansion by regional carriers, and higher aircraft utilisation as favourable industry tailwinds.
“These trends are expected to sustain demand for time-critical aerospace logistics services, which are less price-sensitive and support stronger margins,” Mercury Securities said.
It added that the anticipated surge in passenger traffic from Visit Malaysia Year 2026 is pushing Malaysian carriers to expand seat capacity, routes, and fleets, with projections showing a 30% expansion from 2024 to 2026.
