AGX: Earnings Forecasts Raised on Strong MAG Contribution and Efficiency Gains, Target Price Increased
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.90 (+60.7%) |
| Last Traded | RM0.56 |
| Recommendation |
PhillipCapital has reiterated its BUY recommendation and raised its 12-month target price for the logistics provider to RM0.90, up from RM0.85. This optimistic outlook is driven by the company’s robust growth prospects, particularly its pivotal role as a primary service provider for Malaysia Aviation Group (MAG) logistics.
Despite anticipating some near-term headwinds that will lead to a 17% trim in 2025E Earnings Per Share (EPS), the investment bank is more bullish on the longer term. PhillipCapital has significantly raised its 2026-27E earnings forecasts by 6-14%, factoring in the anticipated ramp-up of MAG’s contributions and the company’s demonstrated operational scalability.
Strategic Partnership with MAG
The company’s appointment as a primary service provider to Malaysia Aviation Group (MAG) marks a significant growth catalyst. In this role, the company will handle freight forwarding and customs brokerage for MAG’s aircraft parts, managing a substantial share of its Maintenance, Repair, and Overhaul (MRO) and Aircraft On Ground (AOG) logistics. This expanded scope, combined with increased fleet activity expected from Visit Malaysia 2026, positions the group to benefit from heightened maintenance demand.
Management projects a six-month ramp-up period for MAG operations to achieve full operating efficiency, with full contribution expected by 4Q26. Notably, the company’s Malaysian operations, currently employing 100 staff, anticipate only a 10-20% increase in headcount for the MAG integration, underscoring the strong scalability and minimal incremental costs of its business model. MAG’s earnings contribution is expected to eventually be comparable to that from other major airline customers, with PhillipCapital assuming it will contribute approximately 11% of total group revenue in FY27E.
Fleet Expansion and Future Outlook
The company has shown strong execution in fleet expansion, increasing its total serviced fleet to 534 aircraft across various airlines, including new additions like VietJet Air and Sun Phu Quoc Airways, alongside Philippine Airlines. This represents a 121% growth in fleet coverage. Furthermore, the company has identified 753 aircraft across regional airlines as potential onboarding opportunities, supporting a clear long-term growth trajectory in the ASEAN region.
The stronger earnings visibility, underpinned by a projected three-year Compound Annual Growth Rate (CAGR) of 43%, provides a clear catalyst for potential re-rating as MAG’s contribution materializes and broader macroeconomic conditions normalize. The company is currently trading at an attractive forward 7.4x 2026E PE, compared to the target 12x 2026E PER used for the valuation.
Key Risks
Key downside risks identified include lower-than-expected freight demand, a decline in freight rates, and the potential loss of customers. However, the company’s strategic diversification and incremental revenue streams from new partnerships are expected to enhance its revenue resilience and mitigate customer concentration risk.
