• A new era by combining 3 into 1. Post-merger in Oct 2014 with OPUS and PROPEL, Edgenta (formerly Faber) had transformed the enlarged entity into Malays ia’s larges t and fully integrated As set & Facilities Management (AFM) player, from previous focus on healthcare (i.e. hospital support services) segment. Its assets subsequently surged more than three folds from RM836m to RM2.6bn.
• To recap, in terms of FY14 revenue breakdown, ADMC made up 53%, IM at 25% and IFM at 22%. Today, Edgenta group’s core bus iness es are: (1) Integrated Facilities Management (IFM) which mainly consists of hospital support services that it has already been undertaking prior to the merger. Faber recently inked a new concession agreement (CA) for its hospital support services which will last another 10 years. While maintaining its 100% stake for the Northern Peninsular concession, this was cut to 40% for East Malaysia; (2) Infrastructure maintenance (IM) which is undertaken by PROPEL. More than 60% of PROPEL’s revenue comes from a stable portion, mainly from the maintenance of PLUS owned highways. PROPEL is also looking at pavement contract works from several upcoming highways and utilities relocation for the MRT2 and LRT3; and (3) Asset development and management consultancy (ADMC), which is undertaken by OPUS. Overall, growth is expected to be strongest in Malaysia and UK, flattish in NZ and Canada while Australia will remain challenging. We view Opus as a good proxy to the global infra scene with higher margins vis-à-vis a typical contractor and no building material price risk.
• HLIB Institutional Research has a BUY rating on EDGENTA with target price of RM4.76, or 39.6% upside. EDGENTA remains our top construction proxy pick as it offers stable yet decent growth prospects (FY15-17-year CAGR: 9%) at valuations of 10.9x and 10x FY16-17 P/E. Dividend yield is also decent at 4.6-5% for FY16-17, respectively with solid net cash position of RM0.59/share end Mar 2015.
• Poised to retest 52-week high after a brief consolidation. After hitting alltime high of RM3.87 on 25 May, Edgenta share prices engaged in rangebound consolidation before ending at RM3.41 yesterday. Chart wise, higher bottom form ation and “Tweezers Bottom” candles tick patterns coupled with bottoming up indicators suggest potential reversal of downtrend. Hence, share price is expected to resume its previous uptrend after a brief consolidation.
• A decisive breakout above RM3.50 (100-d SMA) will spur prices higher to retest RM3.55 (50-d SMA) and RM3.71 (2 July high) targets. Our long term objective is RM3.87. Major supports are situated at RM3.33 (28 July low) and RM3.23 (16 June low). Cut loss at RM3.17.

Source: Hong Leong Investment Bank Research - 4 Aug 2015