INVESTMENT HIGHLIGHTS

• Edgenta secured a newly re-structured HSS contract in Singapore

• Contract value of up to RM540m for up to 5years with optional extensions of up to 5years

• New contract is based on Singapore’s newly re-clustered hospitals

• Contract provides longer term earnings visibility

• FY19-20F earnings maintained for now

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

New HSS re-structured contract in Singapore inked. UEM Edgenta Bhd’s (Edgenta) has announced that UEMS Solutions Pte Ltd, an indirect 97.46% subsidiary of the company was awarded contracts for the provision of hospital support services (HSS), which include: housekeeping and portering services to the Ministry of Health of Singapore’s restructured hospitals.

Contract details. Based on the provisions of HSS that will be provided to the newly restructured hospitals, the contract value is estimated to be between RM430m to RM540m whereby the final contract value will be dependent on the actual manpower resources deployed by Edgenta. Meanwhile, the contract duration will be between three to five years with an option to extend for another two to five years. This could translate to a range of about RM86-180m worth of annual revenue for the company depending on the final value and duration of the contract.

New contract is based on re-clustered hospitals. While the provision for HSS that were agreed upon is highly similar to that of its other contracts with MOH, the new contract that Edgenta has secured is based on the new hospital clusters as the hospitals in Singapore were successfully re-clustered back in 1H of 2018. As a result, there is a possibility that there are new additions to the number of healthcare facilities to be managed by Edgenta under the new cluster system. Hence, expanding its HSS reach in Singapore.

Improved earnings visibility. With the new contract secured, the earnings visibility for the HSS segment in Singapore has improved. This is due to the longer duration of the new contract of between three to five years as opposed to one to three years previously.

Source: MIDF Research - 5 Jul 2019