Summary

• Earnings recap. As highlighted in our previous report, AWC’s FY26 core PAT came in at RM20.1m (-19.3% YoY), within expectations at 104.1%/101.3% of our/consensus forecasts. Reported PAT was higher at RM26.4m (+6.2% YoY), mainly due to a RM6.3m impairment reversal in 4QFY26. Moving forward, earnings momentum should remain supported by its expanding data centre pipeline and RM847.4m outstanding order book.                                        
• Data centre momentum accelerating. Data centre subcontracts under the Engineering segment have reached an all-time high order book of RM100.0m. Moving forward, management conservatively projects RM100.0m–120.0m in annual order book replenishment across FY27f and FY28f, anchored primarily by plumbing and air-conditioning packages for regional data centre developments.
• Concession and healthcare visibility intact. Management remains optimistic about securing its government facilities maintenance concession extension, which is expected to contribute ~RM70.0m in FY27f despite no official update from relevant authorities yet. Furthermore, hospital support and maintenance services across three major healthcare facilities (Hospital Shah Alam, National Cancer Institute Putrajaya, and Hospital Orang Asli Gombak) are anticipated to continue seamlessly, contributing RM50.0m–60.0m in revenue for FY27f.
• Strategic pivot toward India in Environment segment. Amid persistent geopolitical headwinds in the Middle East, management is shifting its Environment division's growth focus toward major public infrastructure tenders in India, specifically smart cities and airports. Consequently, short-to-medium term segment performance will rely on Malaysia, Singapore, and India as key drivers while awaiting operational recovery in the Middle East. 
• Penang LRT subcontract opportunities starting CY27. While viewing the rail systems contract award for the Penang LRT project positively, management expects tangible earnings contributions to materialize starting CY27 when specialized subcontract packages (track works, depot equipment, and maintenance systems) open for bidding. In the interim, AWC maintains a healthy existing rail order book of RM72.1m, supported by ongoing works such as the Prasarana Ampang Line conductor rail replacement.

M+ Global View

• Following the 4QFY26 results briefing, we maintain a cautiously optimistic stance on AWC. Growth is set to be strongly anchored by the Engineering division, where expanding data centre exposure in plumbing and HVAC systems provides strong earnings quality and replenishment momentum, supported by management's RM100.0m–120.0m annual order book replenishment guidance for FY27f–FY28f.
• We view AWC’s pivot to target Indian smart cities and airport projects as strategic hedge against Middle East geopolitical project delays. While initial earnings contributions from India remain subject to tender execution, domestic execution in Malaysia and Singapore should continue to buffer the Environment division’s base earnings.
• The anticipated extensions for both the facilities maintenance concession (~RM70.0m) and hospital support services (RM50.0m–60.0m) will ensure solid recurring revenue visibility for the Facilities segment in FY27f. Meanwhile, potential rail subcontract rollouts for the Penang LRT in CY27 provide longer-term upside to the group’s RM72.1m existing rail order book.

Valuation & Recommendation               

• Forecast. Following stronger traction across the Engineering segment alongside an improving overall operational outlook, anchored by data centre momentum, anticipated facilities concession renewals, and strategic regional expansion, we upgraded our FY27f and FY28f core PAT forecasts by 10.3% and 5.8%, from RM25.2m and RM27.8m to RM27.8m and RM29.4m, respectively. Meanwhile, we also introduced our FY29 forecasts.
• Maintained BUY with a higher TP of RM0.65. We maintain our Buy recommendation with a higher TP of RM0.65 (from RM0.59). The target price is derived based on a P/E ratio of 10.0x pegged to our revised FY27f fully-diluted EPS of 6.50 sen.
• Downside risks. Risks to our recommendation include (i) failure to renew the government’s concession contract and (ii) continued delays in Middle East project progress.