KUALA LUMPUR: Malaysian Rating Corporation Bhd (MARC) has affirmed its AA-IS rating on UEM Edgenta Bhd's Islamic commercial papers (ICP) and Islamic medium-term notes (IMTN) under the sukuk Murabahah programme of up to RM1 billion with a stable outlook.
MARC said the ratings were driven by UEM Edgenta's established strong operating track record in healthcare and infrastructure services gained through long-term contracts in healthcare support services (HSS) and highway maintenance works.
The company's strong credit profile is underpinned by healthy liquidity and a low leverage position.
"Moderating factors to the ratings are pressures on margins due to increased operating cost, and potential further deferment of work orders under its infrastructure business," MARC said today.
MARC said the higher operating cost for UEM Edgenta's HSS business was associated with requirements to meet stringent precautionary measures during the pandemic in 2020-2021.
"The margin compression and escalating pandemic-induced cost in the Malaysia concession business has resulted in a pre-tax loss of RM5.2 million for subsidiary Edgenta Mediserve Sdn Bhd.
"However, this loss was offset by its overseas HSS business, undertaken by subsidiary UEMS Pte Ltd, which recorded an operating profit of S$31.2 million," it added.
For the first half of 2021 (1H21), UEM Edgenta's consolidated revenue improved 7.6 per cent to RM1.0 billion while pre-tax profit remained modest at RM29.6 million.
Consolidated borrowings stood at RM464.6 million as at end-June 2021, translating to a low gross debt-to-equity ratio of 0.30 times. This included the outstanding sukuk of RM250.0 million.
MARC said UEM Edgenta has a strong liquidity position and remains in a net cash position.
"Going forward, it has work-in-hand worth a combined RM11.6 billion as at end-June 2021, the bulk of which is related to infrastructure services (RM7.3 billion) and healthcare support (RM3.4 billion).
"This will support earnings visibility in the medium term," it added.