Melati Ehsan rises 5.7% on 30-year government concession

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KUALA LUMPUR (June 4): Shares in turnkey contractor and property developer Melati Ehsan Holdings Bhd jumped as high as 5.7% to RM1.29 today in the morning trade on news that it had signed a 30-year concession agreement with the Ministry of Education and Universiti Malaysia Sabah yesterday to develop the latter’s teaching hospital in Kota Kinabalu for RM652.98 million.

At 9.04am, Melati Ehsan erased part of its gains to settle at RM1.26, still up 4 sen or 3.28%. At current price, Melati Ehsan’s market capitalisation expanded to RM150.6 million.

Year-to-date, Melati Ehsan has gained 6 sen or 5%, outperforming the FBM KLCI, which slipped 0.88%, according to Bloomberg.

In a filing with the local bourse yesterday, Melati Ehsan said its 49%-owned B H O Melati Sdn Bhd (BHOME) would undertake the planning, construction, equipping, testing and commissioning of the facilities and infrastructure of UMS Teaching Hospital, and carry out the asset management services. The construction is expected to be completed within 36 months from the construction commencement date.

“The concession agreement is conditional upon BHOME having obtained a written notice from the government, confirming that it has fulfilled the conditions precedent within nine months from the execution date of the agreement, or the extended period granted pursuant to the concession agreement by its submission to the satisfaction of the government and UMS (of a list of documents),” Melati Ehsan stated in its filing.

The documents include the letter of offer issued by lenders showing financial support, and evidence that BHOME has an issued and paid-up capital of not less than RM5 million.

Melati Ehsan (valuation: 1.4; fundamental: 1.8) said BHOME will provide asset management services upon the issuance of certificate of acceptance for the facilities and infrastructure by UMS, adding that BHOME would also be entitled to availability charges and asset management services charges, according to the terms and conditions.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)