KUALA LUMPUR (March 2): Hong Leong Investment Bank (HLIB) Research has raised its target price for UEM Edgenta Bhd to RM2.00 (from RM1.77) based on sum-of-parts (SOP) discount from 25% to 15% and said it believes the company is set for a recovery path in FY21 across all its business segments.

HLIB analyst Farah Diyana Kamaludin in a note today said that as the management’s focus remains on cost rationalisation initiatives and prudent cash flow management, she expects a stronger FY21 showing on the back of UEM Edgenta’s healthy order book of RM12.2 billion and gradual recovery path post-Covid-19 pandemic.

Meanwhile, Farah noted that UEM Edgenta’s FY20 results with revenue of RM2.0 billion (-15.4% year-on-year) that brought core profit after tax and minority interests (PATMI) to RM45.5 million (-71.3% year-on-year) came in within house expectations but above consensus’.

In a recent briefing for analysts, the company unveiled its new drive on Edgenta of The Future 2025 (EoTF 2025), whereby UEM Edgenta would be positioning into a technology-enabled solutions company with a prime focus on healthcare and infrastructure as the company aims for digitalization in all aspects of its business.

According to Farah, for the first two phases, the company would be focusing on digital healthcare, QuickMed and infrastructure road asset management system.

“Also, cost control and efficiency savings through automation and mechanisation is estimated to bring about RM100 million of operational cost savings over the next five years,” she added.

Furthermore, Farah highlighted that UEM Edgenta also aims to expand its footprint into high growth markets in Pan Malaysia, Southeast Asia and Gulf Cooperation Council (GCC).

However, the research house maintained its "buy" rating on the stock at RM1.72 and kept its earnings forecast unchanged.

At the time of writing, UEM Edgenta shares were up one sen or 0.58% at RM1.73, with a market capitalisation of RM1.44 billion.