Edgenta reported a 4Q22 core PATAMI of RM11m (-36.4% QoQ, -58.2% YoY), bringing full year FY22 core PATAMI to RM56.6m (-6% YoY). The performance came in within our but below street projections at 101% and 93% respectively. Maintain earnings forecasts as results were in line. SOP-derived TP of RM1.32 is also remain unchanged, reiterate BUY as valuations remain attractive. Edgenta is currently trading at a P/B multiple of 0.49x, close to 2SD below its recent 5- year average.

Within expectations. Edgenta reported a 4Q22 core PATAMI of RM11m (-36.4% QoQ, -58.2% YoY), bringing full year FY22 core PATAMI to RM56.6m (-6% YoY). The performance came in within our but below street projections at 101% and 93% respectively. 4QFY22 core PATAMI was arrived at after adjusting for EIs amounting to –RM10m, which predominantly comprises of fair value gain on investment properties.

Dividend. Declared DPS of 4 sen for FY22, going ex on 19 April 2023. (FY21: 3 sen)

QoQ. Total revenue reported a 10% growth, underpinned by better showing in its Healthcare Support (HS) (+12%), Infrastructure Services (IS) (+6%) and Property and Facilities Solutions (PFS) (+26%) segments, due to an overall increase in work orders. However, Asset Consultancy’s (AC) revenue fell 18% due to lesser ongoing consultancy work. Hampered by growing operating expense, higher finance costs and lesser share of associate profits, core PATAMI reported a 36.4% decline.

YoY. Revenue saw marginal growth of 1.6% YoY, as the stronger contribution from IS (+16%) and PFS (+15%) segment was partially neutralised by the weaker showing in AC (-10%) and HS (-5%) segment. Improvement in both IS and PFS segment was mainly attributable to more work being carried out and higher maintenance works for the expressways as traffic volume increase and normalises post pandemic. Core PATAMI slipped 58% mainly due to lower share of associate profits and higher operating expenses.

YTD. Overall revenue grew 10% on the back of improved contribution across all key segments (HS: +4%, AC: +21%, IS: +29%), except PFS segment whereby revenue was flattish (+0.6%). The HS segment was supported by contracts secured both locally and overseas, whereas the AC and IS segment benefitted from the absence of lockdowns in FY22 as traffic volume on the expressway recovers and consultants being able to carry out consultancy works in East Malaysia. Dragged by the lower share of associates profits, core PATAMI slipped 6%.

Outlook. Edgenta achieved an orderbook replenishment of RM1.36bn in FY22, up 30% vs SPLY. Bulk of the new wins (62%) are from international markets, and 60% of the total wins are healthcare-related contracts. Edgenta remains committed to continue growing its business outside of Malaysia and it is currently exploring potential partnerships that will help strengthen its footing in the international healthcare space. Edgenta has recently inked a memorandum of business explorations (MOBE) with WAS, First Ambulance Services and Optima Technic for potential collaborations with its HSS division.

Forecast. Unchanged as Results Were in Line.

Maintain BUY, TP RM1.32. SOP-derived TP of RM1.32 remain unchanged, reiterate BUY as valuations remain attractive. Edgenta is currently trading at a P/B multiple of 0.49x, close to 2SD below its recent 5-year average.

Source: Hong Leong Investment Bank Research - 1 Mar 2023