UEM Edgenta Bhd's ("Edgenta") growth momentum remains sustainable backed by work-in-hand worth RM13.5b, comprising of concessions and contracts over a period of between 5-10 years. BUY with target price of RM 3.10 based on 17x P/E FY20 as per average of its peers. 

UEM Edgenta is one of the region's largest Total Asset Solutions company with total workforce close to 17,000 spanning across Malaysia, Singapore, Taiwan, United Arab Emirates, India and Indonesia. 

Healthcare segment which is the main revenue contributor serves over 200 hospitals within the region. Edgenta manage to achieve more than 80% of contracts retention rate primarily due to their solid track record further exemplified by the recent new/renewal contracts such as the Sengkang General Hospital in Singapore as well as Tri-Service General Hospital and Far Eastern Memorial Hospital in Taiwan. 

Infrastructure division profit margin is expected to enhance further as Edgenta has started implementing performance-based contract ("PBC") since 2H18. Comparing with conventional input-based contract, PBC enhances service delivery and cost efficiency while the full adoption of PBC will be in Jan 2019. Among others, Edgenta provides services to the North-South Expressway, New Kiang Valley Expressway and the Penang Bridge. 

Edgenta has revised its dividend policy from 70% to between 50%-80% earlier this year and has had consistently declared above 50% payout ratio over the last 5 years. Given its sturdy recurring income steam from concessions via the resilient healthcare and infrastructure sectors, dividend yield is expected to remain strong at 4.6% in FY2019. 

Source: Rakuten Research - 18 Sept 2018