Stake sale to spur UEM Edgenta’s expansion plans

PETALING JAYA: The disposal by UEM Edgenta Bhd of its 51% stake in India-based Faber Sindoori Management Service Pte Ltd may see some dilution in earnings but on the whole, it will accelerate the group’s expansion plans.

RHB Research, which is maintaining its “buy” call on the stock, said post-disposal, it expects a potential dilution of 5% to its 2022 earnings estimates.

“Nonetheless, we maintain our earnings estimates pending completion of the transaction.

“We expect UEM Edgenta to benefit from the full reopening of the economy, which should see a seasonally stronger second-half performance, underpinned by higher road maintenance and pavement works from PLUS

Expressways on higher road traffic volumes.

“Apart from being a key proxy to the reopening of borders, we also like the group for its commitment to a 50% to 80% dividend payout, as well as its current bargain valuation.”

UEM Edgenta is engaged in the provision of management services which include asset management and infrastructure solutions.

In a filing with Bursa Malaysia on Wednesday, the group said its wholly-owned subsidiary Edgenta Facilities Sdn Bhd has disposed of its 51% stake in Faber Sindoori to Apollo Sindoori Hotels Ltd for 700 million rupees (Rm40mil).

Faboor Sindoori was formed in 2007 as a 51:49 joint venture between Edgenta Facilities and Apollo Sindoori to provide integrated facilities management services in India.

UEM Edgenta said the disposal would allow it to monetise its investment for an internal rate of return of more than 20% and proceeds generated to be used to accelerate its international expansion strategy as it moves towards realising its “Edgenta of The Future 2025” vision.

UEM Edgenta also inked a memorandum of business exploration with Apollo to collaborate in new growth areas and to continue introducing innovative solutions to the Indian healthcare market.

The research house said the group is expected to book a Rm3.6mil loss on disposal (on a proforma basis) after factoring in capital gains tax and other transaction-related expenses, noting that the management expects the transaction to be completed by year-end.