UEM Edgenta Bhd’s recent win of additional contracts with Singapore’s Ministry of Health is a good sign of its ability to secure more regional healthcare support businesses, says RHB Investment Bank.
“In our view, the new contract wins are also a testament to UEM Edgenta’s ability to maintain its service quality to hospitals, particularly during this challenging period, which also bodes well for its prospects of securing contract extensions and/or additional contract wins down the road,” said RHB analyst Lester Siew.
The contracts, which were secured by UEM Edgenta’s 97.5%-owned subsidiary, UEM Solutions Pte Ltd, have an estimated aggregate value of between RM265 mil and RM284 mil. This also marks the second round of new healthcare contracts secured from Singaporean hospitals this year for UEM Edgenta.
“While earnings accretion from the contracts are seen as minimal this year – partly due to higher cost intensity expected for this division over the pandemic’s spread – we nonetheless project more meaningful income to flow through from FY21 onwards,” said Siew.
RHB also upped their call to buy for the stock, raising their target price to RM2.75 from a previous RM2.70.
“Our upgrade is premised on the stock’s recent post-results release selldown, which presents an attractive buying opportunity once more,” said Siew, adding that UEM Edgenta has a resilient earnings base once the pandemic blows over, which is backed by a robust order book.
The order book stands at around RM13 bil in work-in-hand works across both the healthcare and infrastructure divisions of UEM Edgenta.
After the morning’s trading, UEM Edgenta’s shares were last done at RM2.07, up 9 sen, with 1 million shares changing hands. – July 10, 2020
