This article first appeared in The Edge Financial Daily on August 1, 2017 - August 7, 2017

AWC Bhd
(July 31, RM1.13)
Buy with a target price of RM1.30: AWC Bhd’s automated waste collection system under the brand STREAM is set to be a major earnings generator with net margins of more than 17%.

AWC has three core businesses, namely facilities, environment and engineering. AWC’s facilities management division continues to perform evidenced by the renewal of concession for building maintenance support services and critical asset refurbishment of federal government buildings in Johor, Melaka, Negeri Sembilan and Sarawak for the next 10 years totalling RM700 million.

AWC’s environment division under STREAM is expected to excel with more contract wins now that it has completed Terminal 4 Changi Airport (Singapore), Cathay Pacific Catering (Hong Kong), and the Al Raha Beach (Abu Dhabi). Further growth impetus from the Housing and Development Board (HDB) of Singapore is expected on the mandatory use of an automated waste collection system plus the impending expansion of Al-Raha Beach.

AWC’s engineering division’s recent acquisition of a 100% stake in Qudotech Sdn Bhd and DD Technique Sdn Bhd (for plumbing works and rainwater harvesting) led to the securing of high-profile projects, such as KL118 Tower (RM61.95 million), PNB1194 (MAS Building, RM19 million) and the Signature Tower at TRX (RM18.15 million).

It has solid financials with a net cash position of RM63.4 million. The company is also backed by a total order book of RM1.1 billion and a 10-year concession with recurring earnings providing earnings clarity for AWC over the next three years with a forecast earnings per share growth of 33.8% for financial year 2017 (FY17), 12.6% (FY18) and 16.3% (FY19). — Rakuten Trade research, July 31