UEM EDGENTA PUSHING FOR GREATER TECH RETURNS

KUALA LUMPUR, June 16  -- Many, if not all companies, would readily admit that 2020 was a year like no other, a year when the COVID-19 pandemic disrupted business in gigantic proportions the world over. 

The ongoing unprecedented crisis has put a lot of companies out of whack and even forced many to close for good.

But a great many did soldier on to weather the storm and recalibrated their game plans to stay in business.

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One such company that found itself between a rock and a hard place was UEM Edgenta Bhd, a home-grown company that specialises in various services, including healthcare support, highway and road infrastructure maintenance; property and facility maintenance; and consultancy for transportation-based infrastructure, utilities and buildings.

In the financial year 2019 (FY2019), UEM Edgenta continued to shine and reported a revenue of RM2.4 billion, up by 10.5 per cent year-on-year or RM228.6 million, while profit after tax (PAT) totalled RM165 million. 

But in FY2020, the coronavirus devastation sliced its revenue to RM2.02 billion, while PAT dipped to RM64.4 million.

In the past, UEM Edgenta had often been admired as a government-linked company (GLC) that paid good dividends.

For example, it declared a 7.0 sen dividend per share in FY2016, followed by 31 sen in FY2017, and 14 sen in both FY2018 and FY2019 as it was committed to a policy of distributing at least 50 per cent and up to 80 per cent of its Profit After Tax and Non-Controlling Interest (PATANCI) as dividends, subject to available cash flow and future financial requirements.

But it decided against declaring a dividend for FY2020.

Chairman Tan Sri Dr Azmil Khalid revealed in the company’s FY2020 annual report that UEM Edgenta’s management had made a prudent decision to preserve its cashflow due to the unprecedented impact of the COVID-19 pandemic.

Despite a shortfall in revenue and PAT, the company’s net operating cash flows of RM220.9 million were almost similar to FY2019’s level.

FY2020 also saw the company ending the year with a healthy net cash balance of RM206.6 million.

It appears that the company wants to manage its cash sensibly given the ongoing pandemic, factoring in additional investments for a stronger presence internationally and to nurture its tech-based growth strategy.

As such, shareholders will have an opportunity to seek greater clarity on these matters at the company’s 58th Annual General Meeting (AGM) on Thursday, June 17.

An analysis of UEM Edgenta’s FY2020 performance showed that the lion’s share of its revenue came from healthcare support at RM1.23 billion.

This may be the impetus for it to place healthcare on a sharper focus from now on.

As for other businesses in its portfolio, highway and road infrastructure maintenance chalked up RM549.1 million in revenue, property and facility maintenance (RM149.2 million) and consultancy for transportation-based infrastructure, utilities and buildings (RM88.1 million).

A closer look at the geographical mix of revenue generation revealed that operations in Malaysia accounted for RM1.23 billion, while overseas operations in Singapore, Taiwan, Indonesia, United Arab Emirates and India brought in RM861.7 million.

But a shift towards a more international profile in time to come can be expected if viewed from the RM1.44 billion worth of new contracts secured last year, as 60 per cent of them came from international businesses and that 92 per cent came entirely from commercial businesses.

These new business trends have necessitated a reworking of UEM Edgenta’s business priorities since a sizable portion of its current businesses in Malaysia are concession-based, which does not allow much room to manoeuvre business margins as they are tied to long-term contracts with the government and related agencies.

While it has a robust order book of RM12.2 billion lasting until 2038, theoretically, this works out only to an annual income of some RM717 million annually, which may be insufficient if it does not diversify from the staid concession business.

Syahrunizam Samsudin, its managing director and chief executive officer who took over the helm of the company on July 1, 2020, has a strong background involving many successful tech-related companies.

Going by what he said at the launch of the company’s refreshed Edgenta Of The Future 2025 (EOTF25) strategic vision three months ago, he is bent on resetting its business priorities to stay ahead of the competition.

His remarks in the FY2020 annual report also alluded to the fact that the company will soon ramp up digitalisation technologies across all its business processes, paying particular attention to optimising returns in the commercial sector while ensuring that its concession-based contracts can be better managed through more tech-based solutions.

Two research houses recently provided positive feedback on UEM Edgenta’s business transition amidst the company’s impending admission into the FTSE Bursa Malaysia Emas Index from June 21.

RHB Small Cap Asean Research said the group’s cost-savings ambitions of RM100 million over five years and the EOTF25 initiatives would place an upside slant to its risk-reward profile.

Meanwhile, Hong Leong Investment Bank remarked that UEM Edgenta’s earnings growth would be driven by international businesses, adding that its push into Saudi Arabia was also a promising area.

Looking ahead, UEM Edgenta’s leveraging an enlarged tech-based vision is only natural and logical as the COVID-19 scare has necessitated a sharper visualisation of securing more profitable business opportunities, especially with the huge demand for top-notch private healthcare support facilities from more affluent clients.

Its gambit encompasses an inevitable shift towards expanding overseas, adhering to a more robust cost management and producing leading-edge technology-based products and services, aimed primarily for the more lucrative commercial sector, while still attending to its local concession-based business as a GLC.

That’s the future UEM Edgenta sees itself in.

-- BERNAMA