AGX: Strong Revenue and Efficiency Gains Offset Associate Weakness, Buy Rating Maintained

Investment bank TA Securities has maintained its “BUY” recommendation for AGX Group, reaffirming a 12-month target price of RM0.90, despite the company’s 2025 core net profit falling slightly below expectations. The positive outlook is supported by robust revenue growth, improved operational efficiencies, and anticipated recovery in associate contributions.

Performance Review

For the financial year 2025, AGX Group reported a core net profit of RM19 million, marking a 19% year-on-year increase. This growth was largely propelled by strong revenue expansion across all business segments and notable margin improvement, with the EBITDA margin rising by 1.4 percentage points due to enhanced operating leverage. While revenue impressively surpassed forecasts at 108%, core earnings registered 91% of expectations, primarily impacted by weaker contributions from its associate, All Link.

The fourth quarter of 2025 (4Q25) saw a sequential dip, with core net profit sliding 31% year-on-year to RM3.1 million. This decline was attributed to weaker operating leverage, softer associate contributions, and higher operating costs, which led to a 2-percentage point drop in EBITDA margin to 6.5%. The associate’s performance was notably affected by tariff-related uncertainty, even in what typically is a seasonally strong quarter.

Future Outlook and Recommendation

Despite the recent headwinds, TA Securities remains optimistic about AGX Group’s future trajectory. The investment bank expects All Link’s contribution to recover strongly, driven by an improving macro environment post-US tariffs and the successful onboarding of two new major customers. All Link’s earnings contribution is projected to increase from RM9 million in 2025 to RM14 million in 2026.

TA Securities has kept its 2026-27E earnings per share (EPS) forecasts unchanged and introduced a 2028E EPS of 10.2 sen, representing a 15% year-on-year growth. The 12-month target price of RM0.90 is based on a 12x price-to-earnings (PE) multiple on 2026E EPS, compared to its last close price of RM0.55. AGX is currently trading at an undemanding forward 7x PE multiple, supported by its expanding footprint in the Southeast Asian market and the growing All-Link contributions. The firm maintains its positive stance on AGX’s earnings prospects, which are underpinned by improvements in aerospace logistics and All-Link’s performance. Key risks to this positive view include lower-than-expected freight demand, declining freight rates, and potential loss of customers.