INVESTMENT HIGHLIGHTS

• 4QFY18 normalised earnings of RM67.7m beat estimates

• Earnings grew by +25.3%yoy despite revenue contraction

• Contributions from HS and PFS cushioned earnings

• Interim dividend of 8.0sen declared

• Maintain BUY with an adjusted TP of RM3.28 per share

4QFY18 earnings beat expectations. UEM Edgenta Bhd’s (Edgenta) 4QFY18 normalised earnings came in at RM67.7m. This led to FY18 normalised earnings of RM148.2m which came in above ours and consensus’ full-year FY18 earnings estimates by >105% respectively. 4QFY18 revenue contracted by -3.7%yoy whilst corresponding normalised earnings grew at a faster pace of +25.3%yoy. On a quarterly sequential basis, both revenue and normalised earnings climbed by +22.5%qoq and +285.8%qoq respectively.

Higher contributions from healthcare services. Healthcare services (HS) segment revenue and PBT grew by +15.0%yoy and +27.3%yoy respectively. This was mainly attributable to higher revenue from new contracts in the commercial healthcare services sector in Taiwan and Singapore which saw a +RM72.2m revenue increase led by AIFS.

Infrastructure services supported by additional works. Meanwhile, segment revenue and PBT of its infrastructure services under Projek Penyelenggaraan Lebuhraya (PROPEL) contracted by -7.6.1%yoy and - 20.5%yoy respectively, mainly due to completion of works in FY17.

Property and Facility Solutions boosted by new projects. The Property and Facility Solutions (PFS) segment revenue and PBT climbed by +17.0%yoy and >100.0%yoy driven by new contracts secured for facilities and township management projects as well as contribution from the new energy performance contracting projects.

Second interim dividend of 8.0sen declared. A second interim dividend of 8.0sen was declared during the quarter-under-review. This brings its total dividend declared to-date to 14.0sen representing a dividend payout ratio of 79% for FY18. This also translates into a dividend yield of 4.9% to yesterday’s closing price or 5.1% yield based on its share price on 31st December 2018. Note that Edgenta has recently revised its dividend payout ratio commitment of between 50% and 80% (from previously 70%) of net earnings.

Source: MIDF Research - 26 Feb 2019