AWC (7579) - CIMB Research retains Add for AWC, higher target price

KUALA LUMPUR: CIMB Equities Research is retaining its Add call for facilities management company AWC with a higher sum-of-parts based target price of RM1.19, after including its upgraded earnings forecasts.

The research house said on Friday AWC is attractively valued at 9.2 times FY17F price-to-earnings (P/E) and FY17F ex-cash P/E of 6.5 times.

“Key risks to the achievement of our target price include project execution and delays. Potential re-rating catalysts are more contract wins and special dividends,” it said.

AWC’s last traded price was 75 sen and CIMB Research’s earlier target price was RM1.13.

AWC announced it secured a RM130mil facilities management contract for the Terminal Bersepadu Selatan (TBS), an integrated bus terminal in Bandar Tasik Selatan, Kuala Lumpur. The five-year contract starts on Sept 1, 2016.

TBS is the main long-distance bus terminal in Kuala Lumpur. It is integrated with the Bandar Tasik Selatan Rail Interchange Station, forming a 24-hour integrated transportation hub. TBS was built to relieve the heavily congested Puduraya Bus Terminal located in the city centre.

“The announcement came as a positive surprise as we had not imputed any new contract wins for the facilities division. As a result, we raise our FY17-18F EPS forecasts by 8%. FY6/17 will see the impact of 10 months of revenue and earnings contribution.

“This win comes fresh on the heels of the Tun Razak Exchange (TRX) contract win by its plumbing division last week, meaning that all divisions have become growth engines.

“We had previously assumed that the facitilies division was merely a low-growth steady state cash cow for the group. With its strong niche and relationships with government-linked entities, this unit could surprise on the upside in the medium term with more contract wins in the commercial and healthcare divisions,” said CIMB Research.

AWC (7579) - CIMB Research retains Add for AWC, higher target price