AWC set for robust earnings growth amid surging property, data centre markets
04 Feb 2025
The surging property and data centre sectors in Malaysia, along with a strong housing pipeline in Singapore, are set to drive the earnings growth of AWC Bhd’s environment segment, according to Hong Leong Investment Bank (HLIB Research).
HLIB Research noted that AWC is entering an earnings upcycle, supported by its four core business pillars, with the environment segment emerging as a key growth driver.
The strategic move to increase its stake in Stream Group to 100 per cent is expected to be earnings-accretive, positioning AWC to capitalise on the rising demand for modern waste collection solutions, the investment bank said.
Stream, which holds roughly 90 per cent market share in Malaysia, stands to benefit from the country’s strengthening property market and the anticipated increase in new project launches. Additionally, Singapore’s robust pipeline of residential, office, and HDB developments further enhances Stream’s growth prospects.
AWC’s engineering segment is also set to benefit from the positive outlook for Malaysia and Singapore’s property markets, with data centre projects acting as a potential catalyst, HLIB Research said.
“Separately, with its plumbing segment recently securing a prestigious MNC data centre project, AWC is well positioned to ride the DC wave in Malaysia. Based on our estimates, the 4.7GW DC pipeline translates into an opportunity worth RM1.6 billion to RM2.9 billion for the plumbing sector. Notably, DC projects are fast-tracked, offering higher margins vs. property-related jobs. Also, the rapid project turnover further enhances the performance and profitability of this segment.”
Meanwhile, the integrated facility management and rail segments are expected to experience strong earnings growth by FY27, driven by the renewal of existing contracts and the upcoming Penang LRT project.
Overall, HLIB Research projects AWC’s core net profit to grow at a robust compounded annual growth rate (CAGR) of 44 per cent from FY24 to FY27.
The investment bank has initiated coverage on AWC with a BUY rating and a target price of 41 sen.
Looking beyond Malaysia and Singapore, HLIB Research highlighted that the Middle East’s booming infrastructure sector offers significant opportunities for AWC to secure high-value contracts.
“Notably, the value of projects in the Middle East is typically much higher than those in Malaysia and Singapore due to their large-scale nature,” it added.
Additionally, AWC’s rail segment is well-positioned to secure a portion of the upcoming systems contract for the Penang LRT, which management estimates to be worth approximately RM400 million.
Looking ahead, HLIB Research noted that potential rollouts of the MRT3 and Kuala Lumpur-Singapore High-Speed Rail (HSR) projects present further opportunities for AWC to expand its footprint in the infrastructure sector.
Source: NST
