AWC: Capital Strengthening Initiatives Announced, Target Price Adjusted

AWC Berhad has announced a series of corporate proposals designed to strengthen its working capital and enhance financial flexibility for future growth initiatives. The proposed actions include a bonus issue of warrants, the establishment of an Employees’ Share Option Scheme (ESOS), and an authority for a share buy-back.

Corporate Proposals Unveiled

The company plans to issue free warrants on a one-for-four basis to existing shareholders. These warrants will have a five-year tenure and, if fully exercised at an assumed price of RM0.93 per share (a 23.9% premium to the five-day volume-weighted average price of RM0.75 as of 31 October 2025), could potentially raise up to RM78.9 million. These proceeds are earmarked to bolster AWC’s working capital requirements.

Concurrently, AWC Berhad aims to establish an ESOS, representing up to 15% of its total issued share capital, excluding treasury shares. This scheme is intended to reward, retain, and motivate eligible directors and employees across AWC and its subsidiaries. Furthermore, the company seeks a share buy-back authority of up to 10% of its existing issued shares, enabling it to repurchase its own shares from the open market.

All three corporate proposals — the bonus issue of warrants, ESOS, and share buy-back authority — are subject to shareholder approval at an extraordinary general meeting (EGM) to be convened at a later date.

Analyst View and Outlook

Analysts view these proposals as neutral to mildly positive in the near term. While the full exercise of warrants and ESOS, coupled with a potential 10% share buyback, could lead to a significant shares dilution of approximately 20% (based on the current issued share base of 339.4 million), the potential to raise over RM78.9 million in new working capital is expected to significantly strengthen the company’s balance sheet and provide greater financial flexibility to support future growth initiatives.

The forecast for AWC’s earnings remains unchanged, with analysts planning to reassess assumptions upon the release of upcoming 1QFY26 results. The outlook for AWC remains positive, underpinned by recent continuous contract wins, including a facilities management contract for TM’s data centre.

Valuation and Recommendation

Despite the positive operational outlook, the investment bank has maintained its HOLD recommendation. However, the target price (TP) has been lowered to RM0.660, from the previous RM0.805. This adjustment primarily reflects the impact of share dilution, as the number of shares is expected to increase from 339.4 million to 427.6 million. The revised target price is derived based on a P/E ratio of 10.0x pegged to mid-FY27f fully-diluted EPS of 6.58 sen, down from the previous 8.05 sen.