Edgenta’s FY20 core PATMI of RM45.5m (-71.3% YoY), was within our expectations but above consensus’. Core PATMI was reached after adjusting for net EIs of RM32m. FY20 revenue drop (-15.4% YoY) was heavily affected by Covid- 19 pandemic thus all segments fell except for Healthcare (+9.1%) which was supported by key contracts wins. We maintain our forecasts. In light of recent share price weakness (-23% since late Nov 2020), there is now sufficient buffer to warrant a BUY call (from Hold), we maintain our SOP based TP of RM1.77.

Within expectations. 4Q20 core PATMI of RM34.9m (+276% QoQ, -52.5% YoY) brought the FY20 sum to RM45.5m (-71.3% YoY). Core PATMI was reached after adjusting for net EIs of RM32m on gain on disposal, net loss on foreign exchange and reversal of impairments. The results came in within our expectations at 103% but above consensus’ at 114%.

Dividend. No Dividend Was Declared.

Healthcare. Healthcare division revenue increased (+9.6% QoQ, +13.4% YoY, +9.1% YTD) thanks to increased healthcare support work from commercial contracts secured in Singapore and Taiwan. However this was slightly offset by lower contribution from its Malaysian operations (non-continuing project, National Cancer Institute). QoQ and YoY’s PBT improved with higher intensity (+374% QoQ, 203% YoY) due to improved cost management as well as grants received from the Singapore government (amidst Covid-19 pandemic). FY20’s PBT dropped (-6.6% YTD) mainly caused by margin contractions from its commercial business in Singapore and Taiwan (stiff price competition for contracts won), and higher operating costs in its Malaysian concession operations (higher Covid-19 related costs; cleaning, sanitization, staff overtime). Edgenta will continue to focus on managing its costs efficiently and accelerate its adjacent revenue streams through digital healthcare and Covid-19 business solutions (workplace screening, sanitisation & disinfection, and COVID RTK & PCR Testing).

Infrastructure. QoQ, PROPEL saw improvement in revenue (+57.8%) with higher expressway pavement works undertaken post peak of MCO. Yet, PBT was hurt (-135%) due to higher operational costs during the quarter. Both YoY and YTD’s revenue fell (- 42.1% YoY, -39.9% YTD) due to MCOs with travel restrictions and lower traffic volumes which lowered works done on pavements and expressway paired with deferment of non-critical projects. PBT mirrored the fall (-82.1% YoY, -71.4% YTD) due to higher operational costs paired with lower margin on works. We remain optimistic on gradual recovery of works in hand with continuation of postponed works.

PFS. QoQ, Property and Facility Solutions (PFS) division saw an increase in revenue (+51%) due to newly secured projects namely on 287 CIMB branches and Mercu UEM. Contrary, YoY and YTD’s revenue declined (-7% YoY, -19.9% YTD) due to some non continuing projects (cessation of township management and completion of projects in Malaysia and Dubai). PBT fell (-104% YoY, -56.6% YTD) due to lower margins achieved. Edgenta will be aiming to secure more new projects in high-value commercial and industrial buildings.

Forecast. Unchanged as results were within expectations.

Upgrade to BUY, TP: RM1.77. In light of share price weakness (-23% since late Nov 2020), there is now sufficient buffer to warrant a BUY. We upgrade our call to BUY (from Hold) but maintain our SOP based TP of RM1.77. We reckon Edgenta will continue to chart a recovery path in FY21.

Source: Hong Leong Investment Bank Research - 26 Feb 2021