PETALING JAYA: UEM Edgenta has a tough job of sweating its assets following the completion of a three-way merger between Faber Group Bhd, Opus Group Bhd and Projek Penyelenggaraan Lebuhraya Bhd (Propel).
UEM Edgenta had become the largest total asset solutions entity in Malaysia, with group assets worth over RM2.6bil as of 2015, after the RM1.51bil merger in 2014.
Juggling eight businesses, chief executive officer Azmir Merican (pic) said that there is still a lot more to be done to blend in all businesses to ensure smooth operation within the company.
Under the UEM Edgenta stable, the group provides services in asset consultancy, healthcare, infrastructure, facilities, industrial, energy, property services, environmental and material testing services.
“We have room for improvement. We think it’s the right time to review the way we are operating and see what we can do better.
“We will invest time in that,” he said.
The company is trying to lessen its dependency on being a concession-based firm and is looking for more jobs in the private sector.
“After the merger, only 40% is concession-based. The growth is set. It allows us to branch into other areas.
“The challenge is how much can we grow in Malaysia and beyond the country. I think in hospital support there is room to grow as we have been in the sector for a long time,” he says.
But the growth into private sector is different, as it would be more specific compared with concession-based type of jobs, he added.
UEM Edgenta is eyeing hospital support services contracts from private hospitals to offset the impact of declining contribution from its long-term concession with the Health Ministry.
After the merger, UEM Edgenta’s first acquisition was an 80% stake in KFM Holdings Sdn Bhd for up to RM128mil in cash and shares. It aimed to expand its asset management services in Malaysia and the UAE.
Through KFM, UEM Edgenta is set to benefit as it had a 20-year concession (of which it has 15 years remaining) from the Prime Minister’s Office in Perdana Putra Complex, Putrajaya, to provide initial rectification works, retrofitting works, asset maintenance services and asset management programmes worth RM600mil.
“There are also opportunities for UEM Edgenta in the Middle East and this can be done through the KFM acquisition, particularly in the non-health care sector,” he added. Following the reduction in the number of public hospitals serviced by UEM Edgenta to 32 from 81 nationwide effective April 1, 2015, the group’s pre-tax profit for the financial year ending Dec 31, 2016 (FY16) is expected to decline by RM45mil and revenue by RM280mil, according to an earlier report.
Azmir said that the group could introduce more products and services to make up for the decline.
He said that KFM was probably going to soften only 30% of that loss.
“We need to work a lot harder to make up for that. We are still looking at possible acquisitions. That’s a way of gaining what we lost,” he said.
UEM Edgenta is re-establishing its presence and services in the Middle East, but there are challenges in handling business overseas.
Once UEM Edgenta is confident of its operational efficiency, then only would the company send its team overseas, he said.
“A lot of times we send people overseas but they are not ready and unable to cope because things are different there compared with Malaysia.
“I used to send people to the Middle East but after a while they couldn’t hack it because it’s different,” he said.
Azmir added that UEM Edgenta needed to get processes as well as the other international companies who are operating there.
“We know that for us to grow we have to be good. We used to deliver hospital support service in the Middle East but after a while we lost focus and got into other things, so the long-term plan now is that we have to fix the operations and be the best in class before going back into the market,” he explained.
In Malaysia, UEM Edgenta had won a contract to manage Zone III state roads in Selangor, its first foray into state road maintenance.
UEM Edgenta is also setting up a pre-mix plant, which will have the capability to produce different pavement materials from raw materials, recycled waste and milled pavements, according to its 2015 annual report.
Azmir said that people are conscious of toll rate increases, and there is a lot of pressure to reduce cost.
By the end of the year, Azmir said the company would have quite a number of new and internally-developed pavement materials. “We want to be sustainable and environmentally-friendly in our operations. We’re trying to be different,” he said.
Meanwhile, analysts said that they were more positive on UEM Edgenta’s prospects following recent events that might provide a much-needed earnings catalyst.
RHB Research, had on May 12, upgraded UEM Edgenta to “buy” from “neutral” with a target price of RM5 after the group appointed Borneo Highway PDP Sdn Bhd (BHP) as the project delivery partner (PDP) for the Pan Borneo Highway in Sabah.
UEM Edgenta’s parent company UEM Group owns a 20% stake in BHP.
“In our view, the appointment of BHP as the PDP for the Pan Borneo Highway Sabah could lead to a possible job win for Propel,” it said.
It also expected UEM Edgenta’s earnings to pick up strongly from next year.