PETALING JAYA: UEM Edgenta Bhd’s shares are staging a rebound after falling to a more than two-year low last week, as investors take advantage of their beaten-down valuations.
The total asset solutions provider saw its shares gaining for the third consecutive trading day, rising 11 sen yesterday to close at RM2.51 on a volume of 279,300 shares.
UEM Edgenta’s shares tumbled last Thursday to a more than two-year low closing at RM2.29, which represented a decline of about 30% from its value in the beginning of the year.
According to Hong Leong Investment Bank (HLIB) Research, the share price weakness of UEM Edgenta provided an opportune time to accumulate the stock.
The brokerage has maintained a “buy” call on the counter, with a lower target price of RM3.34, compared with RM3.52 previously.
HLIB Research’s revised target price for UEM Edgenta implied a valuation of 15 times the estimated earnings for the financial year ending Dec 31, 2017 (FY17) and FY18, compared with 17.5 times previously.
“Despite our lower target price, we feel that the recent share price selldown has been overdone and presents an opportune time to accumulate,” HLIB Research said.
The investment bank noted in its report yesterday that during a recent meeting with UEM Edgenta’s management, the company’s chief executive officer Azmir Merican said there had been no new undisclosed developments that could have explained the recent share price fall.
Meanwhile, MIDF Research has maintained a “neutral” stance on UEM Edgenta, with a target price of RM3.42.
According to HLIB Research, FY17 would mark the full-year contribution from UEM Edgenta’s 80%-owned integrated facilities management services company KFM Holdings Bhd and healthcare facilities manager UEMS Pte Ltd.
“While management expects group topline to grow from these acquisitions, the earnings impact will be less profound in FY17 due to integration costs and a higher finance cost from additional debt (used to fund the acquisition of UEMS).
“Management guides that the earnings kicker from these acquisitions should largely be seen from FY18 onwards once economies of scale sets in,” HLIB Research said in the report.
It pointed out that concerns on the oil price fall leading to impairments at UEM Edgenta’s oil and gas operations in Canada under unit Opus was unfounded, as goodwill had been fully impaired.
In addition, HLIB Research said despite moving from a net cash to net gearing position, the management remained committed to a dividend payout of up to 70%.
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