Road to efficiency
PLUS accepts UEM Edgenta’s proposals on cost-saving
KUALA LUMPUR: Toll concessionaire PLUS Malaysia Bhd has accepted some of UEM Edgenta Bhd’s proposals on the long-term maintenance of its highways under the performance-based contracting method (PBC).
Over time, UEM Edgenta hopes to eventually maintain the highways under the PBC method from the current input base model, according to UEM Edgenta managing director Datuk Azmir Merican.
UEM Edgenta has a long-term contract to maintain and provide services for PLUS’ highways until 2038.
UEM Edgenta currently maintains PLUS’ highways, but it is predominantly under the input base model. Converting it into an outcome-based one will see cost efficiency and better service delivery.
This would also mean that there would be less cost pressures on PLUS should it look to lower its toll charges in the future.
The new government has said that there would be changes to toll charges. For now, it remains unclear whether the new administration plans to remove toll charges entirely, end tolls in stages or pursue a toll rate restructuring.
“This is an ongoing discussion (with PLUS), but some of our ideas have been accepted. Yes, we want to convert to the PBC method. Having done highway maintenance for a while, we can see areas for better efficiencies, how we can start innovating, as well as saving money for the client,” Azmir told a media briefing here yesterday.
PLUS is the largest highway concession in the country, operating eight expressways under five concessions until 2038.
Its highways include the 772-km North-South Expressway (NSE) which runs from Bukit Kayu Hitam in Kedah near the Malaysia-Thai border to Johor Baru, the New Klang Valley Expressway, Federal Highway route two, the SerembanPort Dickson Highway, the NSE Central Link, the Malaysia-Singapore Second Link, Lebuhraya Butterworth-Kulim and Penang Bridge.
Meanwhile, UEM Edgenta currently maintains over 2,500km of expressways and roadways across Malaysia and Indonesia. Some 1,000km of the highways come from PLUS.
For the first six months to June 30, margins for UEM Edgenta’s infrastructure division contributed a profit after tax of RM 37.7 mil, where its margins also improved to 9.6%, up from 8.8% in the same period last year.
UEM Edgenta has four core businesses, which include consultancy, healthcare, infrastructure and real estate.
The healthcare and infrastructure divisions are the biggest contributors, contributing 40% and 36%, respectively, for its first half to June 30. Government contracts make up some 40% of its jobs at present.
Currently, UEM Edgenta has RM 13.54 bil worth of jobs at hand, whereby some 63% of that consists of infrastructure work, while 29% is from the healthcare segment. The consultancy and real estate busi- nesses take up the remaining 4% each.
For the second quarter to June 30, UEM Edgenta’s net profit increased to RM33.4mil from RM27.32mil in the same quarter of the previous year. Revenue jumped to RM554.13mil from RM508.29mil.
Meanwhile, for the first-half period, net profit increased to RM62.96mil from RM54.66mil, while revenue increased to RM1.01bil from RM925.34mil previously.
UEM Edgenta expected to sustain this growth momentum for the rest of financial year 2018 by fulfilling
all of the contracts it has secured to-date, acquiring new revenue opportunities both domestically as well as overseas, and further ramping up its operational efficiency initiatives to improve its margins.
For the first-half period, UEM Edgenta also declared an interim dividend of six sen per share, equivalent to RM49.9mil and representing a payout ratio of 79% on the 2018 first-half results.
On the potential delay in the Pan Borneo Highway and how it may affect UEM Edgenta, Azmir said that the contribution from that division was immaterial. The contract size is also very small in comparison to its order book.
In June, UEM Edgenta’s wholly owned unit – Opus International (M) Bhd – was appointed by Borneo Highway PDP Sdn Bhd as the lead consultant to provide pavement design support for the Pan Borneo Highway Sabah project. That contract was worth RM 60.7 mil over four years.
In the last few months, UEM Edgenta has secured some new contracts. It has been awarded contracts worth S$39.3 mil (RM 117.5 mil) for its healthcare segment and some RM 47.2 mil under its real estate sector.
“Over and above these new contracts which will be revenue-accretive in 2018, we are also working on securing several other sizeable energy performance contracts for a mix of education and industrial facilities in Malaysia.
“We are looking at more healthcare facilities in Singapore and Taiwan as part of our overseas expansion strategy,” said Azmir.