Edgenta delivered a FY21 core PATAMI of RM60.1m (+46% YoY), coming in within our but exceeded consensus estimates, at 102% and 110% respectively. Following the easing of movement restrictions and reopening of economies, Edgenta has reported growth and we anticipate sequential expansion going forward. However, we highlight that it is unlikely for Edgenta to recover back to pre-pandemic levels immediately as it would take time to ramp up on business activities again. That said, we still like Edgenta for its effort in diversifying revenue base, in a bid to accelerate the Group’s recovery. We make no changes to our earnings forecasts, pending an analyst briefing. Reiterate BUY on Edgenta, with an unchanged TP of RM2.23.

Finishing in line. 4Q21 core PATAMI of RM26.3 (+41% QoQ, -14% YoY), brought FY21 core PATAMI to RM60.1m (+46% YoY). The results were within our, but above consensus projections, at 102% and 110% respectively. Core PATAMI was arrived at after adjusting for one-off items (i.e. net forex losses, staff rationalisation costs) amounting to RM17.3m.

Dividend. Declared a DPS of 3 sen, going ex on 20 April 2022 (FY21: 3 sen). 4Q20: None. (FY21: None)

QoQ. Revenue grew 22% mainly due to a recovery in all of its key segments, supported by (i) new revenue streams stemming from Covid related business, (ii) more billable works in Malaysia performed by its Healthcare Support (HSS) segment, (iii) higher revenue generated from its Property and Facility Solutions (PFS) segment in Dubai, and (iv) increase in consultancy work after the easing of movement restrictions. With the higher share of profits from its associates (+3.7x), core PATAMI grew 41%.

YoY. Revenue chalked in a 17% growth, underpinned by (i) new commercial and facilities contracts secured, as well as (ii) higher revenue generated by its Infrastructure Solutions (IS) segment due to more pavement works executed. Core PATAMI, was however, 14% lower, due to widening losses in its Asset Consultancy (AC) segment (as a result of longer lockdown) and thinner margins for its HSS segment (on the back of higher operational cost).

YTD. The 13% growth in revenue was supported by growth across all key segments, with the exception of its asset consultancy segment (-6%) due to the longer lockdown period in FY21 and Edgenta was unable to deploy resources to East Malaysia to carry out consultancy works. Core PATAMI recorded a 46% growth, due to the higher profit contribution from its associate (+47%).

Outlook. As movement restrictions are removed and economies gradually reopen and embrace the new normal, we anticipate sequential recoveries across most of its key segments. However, we note that the recovery back to pre-pandemic levels will take time and is unlikely to happen immediately. That said, we still like Edgenta for its efforts in diversifying revenue base, to help compensate any shortfall in revenue arising from a prolonged recovery.

Forecast. We are maintaining our earnings forecast for now, pending an analyst briefing.

Maintain BUY, TP: RM2.23. Reiterate BUY on Edgenta, with an unchanged SOP derived TP of RM2.23.

Source: Hong Leong Investment Bank Research - 25 Feb 2022