UEM Edgenta identifies Indonesia as key growth market

If you look at the market size, the number of highways that they have…the number of hospitals they have, certainly it’s very attractive, says outgoing MD


UEM Edgenta Bhd is looking at Indonesia as its key growth market for expanding its healthcare and infrastructure divisions for the next two years, as the company looks to leverage the vast opportunity available in the republic.

Its outgoing MD/CEO Datuk Azmir Merican Azmi Merican (picture) said this comes after UEM Edgenta has been in the country for the last four years, running the maintenance of the Cikampek-Palimanan Highway via a partnership with Indonesia’s Astra Group.

“If you look at Indonesia, it’s something that we feel attractive. If you look at the market size, the number of highways that they have, the healthcare side, the number of hospitals they have, certainly it’s very attractive.

“If you look at them, and when you compare with Malaysia, the potential is huge. If we can get a slice of the market, it will be good. How much I can’t really say. It’s too early,” he told reporters at the company’s financial year 2020 (FY20) outlook media briefing in Kuala Lumpur yesterday.

Azmir Merican noted that as a market entry strategy, the company would leverage its digital solutions, which have been successfully implemented locally as well as in Singapore, to be introduced and replicated in Indonesia, where it currently contributes about 5% to the group’s revenue.

He added that UEM Edgenta does not focus on tenders to clinch jobs as it does not believe in competing on price, but rather in providing solutions by monetising and optimising costs based on data collected.

Azmir Merican also said providing technology- based solutions will be a priority, in particular to break into new and existing markets with customised solutions offering real-time Internet of Things and data analytics to optimise asset management.

“Our investments in process improvements, technology and operational excellencehave resulted in the company’s ability to overcome rising costs of delivery, increase operational efficiency and register cost savings, which proved crucial in making the organisation efficient and resilient,” he said.

The company’s acquisition of the UEMS Group in 2016, in particular, has paved the way for significant customer diversification and geographical expansion, in which it currently enjoys market leadership in the hospital support services sector in Singapore and Taiwan.

Azmir Merican added that the company remains cautious on its outlook for the short term on the back of adverse macroeconomic conditions, exacerbated by the threat of the global coronavirus outbreak.

“As such, FY20 will be a year of resilience through operational and organisational excellence to sustain the company’s profit margins, backed by the productisation of new technology solutions,” he said.

However, he noted that the company’s business remained resilient with defensive stocks, mainly healthcare and infrastructure services, contributing 90% of its profit and revenue, with the ratio of its overseas to local business at about 40:60.

Work-in-hand position as of Dec 31, 2019, remained healthy at RM13.2 billion, which translates into earnings visibility until 2038. UEM Edgenta’s earnings for the fourth quarter ended Dec 31, 2019 (4Q19), jumped 43.53% year-on-year (YoY) to RM97.49 million from RM67.92 million a year ago, while revenue was up 10.03% to RM712.26 million from RM647.35 million.

The group attributed profit and revenue mainly to better performances from its asset management and infrastructure solutions segments.

For the 12 cumulative months, UEM Edgenta’s net profit rose 22.47% YoY to RM181.78 million from RM148.43 million, while revenue increased 10.47% to RM2.41 billion from RM2.18 billion.

The company declared a single-tier second interim dividend of eight sen per ordinary share for FY19 due payable on May 14, 2020. Shares of the asset management and infrastructure solutions company closed 7.32% or 15 sen higher to RM2.20 yesterday, valuing the company at RM1.83 billion.