Listed since 1964, UEM Edgenta (EDGENTA) is the region’s leading Asset Management (i.e. Healthcare Support and Property & Facility Solutions) & Infrastructure Solutions (i.e. Infrastructure Services and Asset Consultancy) company. In 1HFY21, the top revenue contributor was derived from the Healthcare Support (HS) division (63.1%), followed by Property and Facility Solutions (24.6%), Infrastructure Services (7.7%), Asset consultancy and others (4.6%).

In anticipation of the rapid digitalization of the HS sector (expected to grow by 15% CAGR in the next few years), EDGENTA believes that this division will continue to drive their post-pandemic recovery, as the group have accelerated regional expansion efforts as well as introducing new-to-market solutions beyond the traditional healthcare offerings. To recap, EDGENTA had secured ~RM721m worth of new contract YTD whereby 72% of it was for HS services. In addition, the recent signed memorandum of business exploration with Asma Advanced Solution LLC to identify strategies to capture the high-growing Saudi Arabia market will serve as a catalyst for the group's future growth.

Although the upcoming 3Q21 results is expected to remain weak amid lockdowns, improving operating business environment since Sep together with several drivers from the healthcare division bode well for E DGENTA’s future prospects. Overall, management aims for an annual revenue growth of 12% for the next five years, driven by its healthcare segment, new market expansion and digitalization, and gradually moving away from a concession-based business model into commercial businesses to achieve a 50:50 contribution.

EDGENTA is currently trading at 11.9x FY22 P/E (62% discount against 5-year average of 31.9x) together with a generous 5.9%-7.0% FY22-23 dividend yield, supported by a strong 39% FY21-23 EPS CAGR. Technically, the stock is pending for an inverse head and shoulder pattern. A successful breakout above its neckline of RM 1.82 will spur the prices toward RM1.90-RM2.00 territory. Cut loss at RM1.69.

Source: Hong Leong Investment Bank Research - 26 Oct 2021