This article first appeared in The Edge Financial Daily on October 15, 2019

AME Elite Consortium Bhd
(Oct 14, RM1.55)
Initiate coverage with buy and a target price (TP) of RM1.83: AME Elite Consortium Bhd provides integrated and comprehensive solutions encompassing the design and construction of customised large manufacturing plants, industrial park developments, and the sale and lease of industrial factory units. It has a proven track record of completing about 200 large manufacturing and industrial buildings for various industries, as well as four industrial parks in Johor.

AME has a high remaining construction and engineering services order book of RM376.9 million, equivalent to 1.4 times financial year 2019 revenue, to be completed by the second quarter of calendar year 2021 (2QCY21). For the property development division, it has remaining industrial land with a gross development value (GDV) of RM1.61 billion, mainly in two of its industrial parks in Johor — the i-Park@Indahpura and i-Park@Senai Airport City (SAC). The RM150 million acquisition of a 77-acre (31.16ha) land for i-Park@SAC’s Phase 3 expansion added another RM555 million to the total GDV.

We initiate our coverage of AME with a “buy” call and TP of RM1.83, based on a 30% discount to the revalued net asset valuation. Its CY20 estimated core price-earnings ratio (PER) of 9.5 times based on AME’s initial public offering price is attractive compared with our construction sector’s — excluding Gamuda Bhd, IJM Corp Bhd and Malaysian Resources Corp Bhd — weighted average core PER of 13.8 times.

We like AME for its niche gated and guarded industrial park development projects, being a total solutions provider for local and multinational companies to build manufacturing plants and logistic warehouses, and its value engineering expertise to reduce construction costs. — Affin Hwang Capital, Oct 10