PETALING JAYA: The prospects for AGX Group Bhd
are set to brighten over the medium term as newly secured aviation logistics work gathers momentum and begins to reshape the group’s earnings profile, says Phillip Capital Research.
While near-term challenges persist, particularly from external trade disruptions, the longer runway is increasingly underpinned by greater visibility from airline-related contracts.
The research house said AGX’s role within the aviation logistics space is set to expand, as the company is expected to secure a substantial share of Malaysia Aviation Group’s (MAG) logistics requirements following its recent appointment.
Its conviction followed discussions with management and reflected expectations that the group would become more deeply embedded in the operational framework of MAG.
Phillip Capital Research reiterated “buy” on AGX, with a higher target price of 90 sen, up from 85 sen previously.
The higher target price followed the research house’s move in raising its 2026-2027 earnings forecasts to factor in the anticipated ramp-up in MAG contribution, while keeping an unchanged 2026 estimated price-earnings multiple of 12 times.
“We recently met with AGX and walked away encouraged by its growth prospects following its appointment as a service provider to MAG, handling freight forwarding and customs brokerage for aircraft parts,” Phillip Capital Research said.
This mandate represented a clear broadening of scope from AGX’s previous involvement, which was limited to aircraft-on-ground services, to a wider remit encompassing core aviation logistics.
The scale and complexity of MAG’s operations are seen as both a challenge and a long-term advantage.
MAG works with about 1,000 aircraft parts suppliers, far more than the roughly 300 suppliers supporting AirAsia.
While this requires more coordination, the research house believes it creates operational stickiness over time.
AGX is expected to act as a primary provider, managing a significant share of MAG’s maintenance, repair and overhaul as well as aircraft-on-ground logistics, alongside one other shortlisted vendor.
Increased fleet activity ahead of Visit Malaysia 2026 is also expected to translate into higher maintenance demand, reinforcing volume growth.
Execution risk is mitigated by the group’s operating leverage.
Management expected a six-month ramp-up period to reach full efficiency under the expanded scope.
AGX employs about 100 employees in Malaysia and anticipates only a 10% to 20% increase in headcount, underscoring the scalability of its platform with minimal incremental costs.
Margins from MAG are expected to be broadly in line with those earned from other airline customers, easing concerns over margin dilution despite greater operational complexity.
Management had indicated that MAG’s earnings contribution could eventually be comparable with AirAsia’s.
The research house is assuming that MAG will contribute about 11% of group revenue by financial year 2027 estimates.
