UEM Edgenta aims to aggressively grow healthcare business

The company is eyeing new tenders in Singapore amid the republic’s move to re-cluster healthcare facilities

By MARK RAO / Pic By RAZAK GHAZALI

UEM Edgenta Bhd aims to secure healthcare support services contracts in Singapore and will participate in new tenders and opportunities following the republic’s move to restructure its healthcare sector.

Its MD and CEO Datuk Azmir Merican Azmi Merican said the tendering process from this restructuring — which saw Singapore’s healthcare sector divided into three integrated clusters — is still ongoing and the company will participate in the bidding.

“We feel we should be able to get more wins, (but) that depends on the timing and when these tenders are issued,” he told reporters during a briefing session at the company’s Kuala Lumpur headquarters yesterday.

“But the overall indication is that we are aggressively growing our healthcare business.”

He said the company is unaware of when these contracts will be tendered, but said the nature of the restructuring requires awards with larger value and longer tenures.

In 2017, Singapore’s public healthcare sector began a major restructuring process which saw six regional health systems regrouped into three integrated clusters.

This was aimed at providing a fuller range of services to patients via these clusters, encompassing acute hospital care, primary care and community care. Thus, requiring the need for relevant support services.

As an asset management and infrastructure solutions company, UEM Edgenta was among the beneficiaries of this restructuring, having secured up to RM540.06 million worth of contracts in July this year to provide hospital services to Singapore’s Health Ministry.

The company’s healthcare business is already its largest contributor, making up slightly over 50% of both the group’s revenue and profit-after-tax (PAT) for the first half of 2019 (1H19), and services over 300 hospitals across Malaysia, Singapore, Taiwan and India.

Azmir Merican said the company is growing across all its markets and is upbeat on the long-term prospects for the healthcare sector.

For Malaysia, UEM Edgenta will look into cross-selling and sharing best practices between its concession and commercial businesses, with prospects for the sector to be supported by the growth in hospitals amid and ageing population and increasing life expectancy.

Notable contracts for the domestic healthcare market include a 10-year national hospital service contract for 32 government hospitals in the northern region of Malaysia.

In the case of Taiwan, the company targets to upsell more services to its existing customer base in the country.

The infrastructure services business was the second-largest contributor to the UEM Edgenta group, accounting for about 35% of total revenue and PAT respectively in 1H19, while the division itself is the leading highway maintenance service provider in Malaysia.

Backed by a long track record of providing services for government-related infrastructure jobs, UEM Edgenta is expected to win more contracts in the foreseeable future as the Minister of Finance Inc intends to take over four toll concessions of major highways for RM6.2 billion.

The takeover, if it materialises, is expected to create new opportunities for consultancy and services works.

Azmir Merican said UEM Edgenta will pursue all opportunities that may arise from this development to consolidate the company’s position as the largest highway maintenance service provider in Malaysia.

“What we focus on is to position ourselves as the market leader for this sector. I think that gives us an edge and we want to obviously pursue any opportunities to deliver value.”

The company is also present in Indonesia and is exploring long-term growth opportunities amid its government’s plans to add to the existing 3,432km of conventional roads and 941km of toll roads that were constructed from 2014 to 2019.

As of 1H19, UEM Edgenta is estimated to have RM13.2 billion in work-in-hand, namely secured orderbook and work based on scheduled rates, providing good earnings visibility going forward.

Of this amount, infrastructure services made up 63.7% of the value while the healthcare business comprised 28.7% of the total value.

Year-to-date, shares in UEM Edgenta outperformed Malaysia’s benchmark FTSE Bursa Malaysia KLCI with a 21.3% return, while the latter is down about 5.9%.

The company gained RM482.34 million in market capitalisation over that same period, and is seen as an attractive defensive stock with a steady dividend payout ratio of above 50% in the past five years.

It closed three sen lower at RM3.30 yesterday, giving the company a market capitalisation of RM2.74 billion.