UEM Edgenta (UEME) posted a 2Q23 core net profit of RM11.5m, in line with seasonality expectations. Higher work orders are typically billed towards 2H.
“Core margins are largely stable at 1.7%, notwithstanding the cost inflation impact thanks to technology deployment in automating work orders,” said RHB Research (RHB) in the recent Malaysia Results Review Report.
Revenue from the healthcare support (HS), and property and facility solutions (PFS) segments were higher by 16% YoY in 2Q23 thanks to the healthy contract won during the previous quarter.
The infrastructure solution or IS division’s revenue grew 6.7% YoY thanks to higher pavement works performed for expressways. To date, UEME has secured RM922m in new contracts, of which 70% were contributed by HS, and achieved 75% of the group’s total contracts secured in 2022. Its outstanding orderbook stood at RM9.6bn, which provides UEME earnings visibility of 3.6 years.
“Core margin held up steadily at 1.7% in 2Q23 thanks to the improvements in operating efficiency,” said RHB.
This is as the group continued to deploy its proprietary tech solutions to mitigate against cost pressure, such as higher staff costs and spikes in raw material prices and a YoY surge in bitumen (used for road maintenance) prices.
“We still like UEME for its commitment to a 50-80% dividend payout. Its position as a differentiated service provider with a commendable clientele base, and ESG enabler solutions in driving Green Building Index (GBI)-certified accreditation for its clients,” said RHB.
The group managed 19 GBI and Leadership in Energy & Environmental Design or LEED-certified buildings as at 2022. Key risks identified by RHB include cutbacks in infrastructure activities, margins compression, and loss of recurring income from non-renewal of facility management contracts.
