UEM Edgenta sees growth momentum to continue in 2HFY18

KUALA LUMPUR (September 5): UEM Edgenta is confident that it could sustain its growth momentum from the first half of the financial year 2018 (1HFY18) to continue for the rest of the year, on the back of margin expansion and service delivery improvement.

Speaking at a media briefing yesterday, chief executive officer Datuk Azmir Merican said the group currently has works-in-hand worth RM13.5 billion, consisting of contracts and concessionaires with periods between five and 10 years.

“We are optimistic about sustaining our growth momentum as seen over the last two quarters. As at June 30, 2018, the value of our works-in-hand remained strong at RM13.5 billion,” he said.

“The fourth quarter is usually our strongest quarter, so the second half [of the year] could even be slightly better [than that of the first half].”

For 1HFY18, the company achieved a 15.2% growth in net profit to RM62.96 million from RM54.66 million in the previous corresponding period, thanks to improvements in operating profit margin. Revenue for the period was 8.8% higher at RM1.01 billion compared with RM925.34 million in 1HFY17.

Azmir said the group’s healthcare and infrastructure segments, with a cumulative contribution of about 80% of its total revenue, will continue to be key drivers of its revenue and expansion goals for profit growth.

“We have driven much operational efficiency over the last one and a half years. This is [now] showing results, so that is why you see margin expansion and also why we are confident in saying this is sustainable [for the rest of the year].”

Meanwhile, Azmir has clarified that the delay in constructing the Pan Borneo Highway in Sabah will not significantly impact the group as the project size is small relative to its total earnings.

UEM Edgenta’s indirect wholly-owned unit Opus International (M) Bhd, in June, secured a letter of award from related party Borneo Highway PDP Sdn Bhd to provide technical support services for the highway for RM60.3 million.

The project falls under the group’s asset consultancy segment, which contributes only 7% or RM65.8 million of the group’s revenue during 1HFY18.

Azmir stressed that since the project is immaterial to the company’s earnings, UEM Edgenta will be able to make up for any potential losses from the contract.

He added that less than 40% of the group’s 1HFY18 revenue were derived from government-related contracts.

Toll concessionaire PLUS Malaysia Bhd has also accepted some of UEM Edgenta Bhd’s proposals on the long-term maintenance of its highways under the performance-based contracting method (PBC), reports The Star.

UEM Edgenta currently has a long-term contract to maintain and provide services for PLUS’ highways until 2038.

UEM Edgenta maintains PLUS’ highways, predominantly under the input base model. Converting it into the outcome-based model will see cost efficiency and better service delivery.

There would also be less cost pressures on PLUS should it look to lower toll charges in the future.

This article first appeared in The Edge Financial Daily, on Sept 5, 2018.

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