Access Engineering (AEL) is the only listed company having significant
exposure to a wide range of construction and engineering related operations.
AEL is engaged in developing heavy infrastructure construction projects in
addition to owning and operating a real estate property portfolio under Access
Realties and sale and repair of heavy vehicles under its subsidiary, Sathosa
The stock took a beating where it fell near 30% following the Presidential
election on 8th January 2015 due to panic selling chiefly among local investors.
The sharp price drop was resulted by the weak sentiment created due to the
uncertainty of the contracts to be awarded in the near future as majority being
public infrastructure projects.
AEL’s main revenue generator, the highway construction sector currently
contributes c.47% of the group topline whilst the building construction sector
accounts for near 21% of the group turnover. The third largest revenue
generating sector is its motor vehicle operation, SMOT contributing c.19% to the
group topline (FY14).
Impact on Project Pipeline
Currently c.72% of group revenues are generated via direct government
contracted projects due to such projects being in public infrastructure, mainly
roads and highways construction. With the change in the government, AEL
faces a risk on its project pipeline with c.45% of revenues in FY16E to derive
from contracts which were recently awarded and are yet to commence. Thus
these projects already awarded to them may have to go through a more
competitive bidding process in addition to delays faced in commencement.
While forecasted revenue streams are sensitive to the future events in the
political front, we are currently unable to provide clarity, thus forecasts and rating
on the counter remains, although are likely to change with more insight gained.