KUALA LUMPUR: UEM Edgenta Bhd expects opportunity in new high growth markets such as Saudi Arabia for its hospital support services (HSS), according to Hong Leong Investment Bank Bhd (HLIB).
HLIB noted that UEM Edgenta believed that its HSS would continue to drive its post-pandemic recovery, as the company had accelerated regional expansion efforts as well as introducing new-to-market solutions beyond the traditional healthcare offerings.
For UEM Edgenta's infrastructure solutions division, HLIB said its profitability would be greatly reliant on Malaysia's ability to keep Covid-19 cases under control and relax movement control order (MCO) restrictions, which would lead to more movement of people, and hence maintenance work on expressways.
HLIB has kept its "Buy" rating on UEM Edgenta despite its first quarter (Q1) ended March 31, 2021 net profit of RM6.7 million was below expectations due to weaker than expected profitability in the infrastructure solutions division.
The rating comes with a slightly lower target price of RM2.40 from RM2.53 previously.
"Despite the earnings miss, and expected continued weakness in infrastructure services earnings going into 2Q21 from MCO3.0, we maintain our 'Buy' as we expect the share price to be supported by reasonable valuations of 15.3 times forward price earning (PE) and dividend yield of 4.6 per cent," it said today.
UEM Edgenta's Q1 core net profit of RM6.7 million accounted for 6.5 per cent and 6.2 per cent of HLIB and consensus forecasts.
The firm has slashed its earnings estimates downwards by 5.4, 2.7 and 0.9 per cent for the year ending December 31, 2020, 2021 and 2022 respectively.
The downward revisions were due to the slower than expected turnaround in Infrastructure services profitability, it said.