[MARC] MARC Ratings upgrades UEM Edgenta’s sukuk rating to AAIS

MARC Ratings has upgraded its rating on UEM Edgenta Berhad’s Islamic Medium-Term Notes (IMTN) under its RM1.0 billion Sukuk Murabahah Programme to AAIS from AA-IS. Accordingly, the rating outlook has been revised to stable from positive. The outstanding sukuk remains at RM250.0 million.

The rating upgrade is premised on UEM Edgenta’s strengthened business profile underpinned by geographical earnings diversification, and adherence to a conservative balance sheet as reflected by low leverage and a healthy liquidity position.

UEM Edgenta provides healthcare solutions, and property and facility solutions through its asset management services portfolio. It also provides infrastructure solutions, comprising infrastructure services and asset consultancy. The healthcare solutions comprise services for a network of public and private hospitals in Malaysia, and through its wholly-owned subsidiary UEMS Pte Ltd, UEM Edgenta has shown steady growth in Singapore and Taiwan. This has reduced its reliance on the healthcare support services (HSS) concession contracts in Malaysia.

For 9M2024, new secured contracts remained on an uptrend at RM2.3 billion (2023: RM2.0 billion); of this, healthcare solutions accounted for 80%. This includes the RM900 million worth of contracts for HSS in Singapore for a period of five years. For infrastructure services, undertaken by wholly-owned Edgenta PROPEL Berhad, the group has a long-term master maintenance services contract with related company Projek Lebuhraya Usahasama Berhad (PLUS) for maintaining PLUS highways. This contract provides an assured income stream through 2038. The group also provides maintenance services for state roads under Jabatan Kerja Raya. The group’s acquisition of a 60% equity stake in United Arab Emirates–based Kaizen Group, a property management company, for RM74.9 million in February 2024, would expand its property and facility solutions portfolio.

For 9M2024, revenue increased by 7.6% y-o-y to RM2.2 billion and pre-tax profit rose by 5.1% to RM65.6 million. Operating margins have remained at around 3%, and the group is undertaking initiatives to strengthen the profitability margin by streamlining operations and leveraging technology to enhance efficiency. The margin improvements are expected to allay concerns over the impact from the minimum monthly wage revision to RM1,700 from RM1,500 effective February 2025.

Borrowings stood at RM475.0 million as at end-September 2024 with gross debt-to-equity ratio standing at 0.30x, a level the group has maintained over the last five years. The outstanding sukuk of RM250 million is due in April 2026. Cash balances of RM494.0 million provide a buffer to meet upcoming financial and operational commitments.

Umar Abdul Aziz, +603-2717 2962/ umar@marc.com.my
Cyndy Goh, +603-2717 2941/ cyndy@marc.com.my
Taufiq Kamal, +603-2717 2951/ taufiq@marc.com.my