UEM Edgenta gains on healthcare, infrastructure contracts

The contract secured with Singapore’s govt gives earnings visibility due to the longer duration of the new contract


UEM Edgenta Bhd has come under investors’ spotlight on expectations the company will win more contracts for government-linked infrastructure projects.

The company has gained a RM360 million of market capitalisation year-to-date (YTD), while its share price has risen 16.3% YTD to RM3.10 last Friday, near two-year highs.

“UEM Edgenta recently accepted a contract for the provision of hospital support services from Singapore’s Health Ministry. The fact that the company won a contract from Singapore’s government shows the company is good at what it is doing.

“UEM Edgenta also has a long track record of serving government- related infrastructure jobs, so it is likely (that) the company will win more contracts in the future, especially now that the government has plans to acquire Gamuda Bhd’s highways and with the resumption of the Pan Borneo Highway project,” an analyst at a local brokerage said.

In addition, UEM Edgenta’s subsidiary, Edgenta Propel Bhd, currently has secured a long-term concession until 2038 to maintain the North-South Expressway.

UEM Edgenta has also posted stable earnings, declared good dividends and has a more than RM13 billion orderbook anchored by healthcare support and infrastructure services businesses.

For the first quarter ended March 31, 2019, UEM Edgenta’s net profitincreased 10.5% year-on- year (YoY) to RM32.66 million, driven by its asset management segment’s healthcare support division.

Its quarterly revenue rose 11.96% YoY to RM515.88 million.

MIDF Research analyst Noor Athila Mohd Razali said in a report last month that the contract secured with Singapore’s government gave earnings visibility due to the longer duration of the new contract of between three and five years, as opposed to between one and three years previously.

The total value of the contract is estimated at between RM429.96 million and RM540.06 million, with the final value subject to actual manpower resources deployed.

“We remain optimistic on UEM Edgenta’s growth prospects going forward as it has proven time and again its capability in delivering facilities support services — especially in the healthcare segment where it continues to be the preferred support service provider in the region.

“We are also positive on the fact that it continues to leverage on its robust network of technology infrastructure, coupled with its proven track record to provide expert facilities management services in both the highway maintenance, as well as the property management segments,” Noor Athila noted.

MIDF Research said the company will continue to tap on underserved areas in both healthcare services and facilities management services, which see an increase in demand for a more responsible facilities management system across all sectors.

MIDF Research reiterates its ‘Buy’ recommendation on UEM Edgenta with an unchanged target price of RM3.28.