[MARC] MARC Ratings affirms UEM Edgenta’s AAIS rating

MARC Ratings has affirmed its rating of AAIS on UEM Edgenta Berhad’s Islamic Medium-Term Notes (IMTN) Programme of up to RM1.0 billion. The rating outlook is stable.

The rating affirmation is premised on UEM Edgenta’s established track record in providing healthcare support services (HSS) under government and private contracts in Malaysia and overseas, and highway and road maintenance services domestically. The affirmation is supported by a conservative balance sheet with low leverage and strong liquidity, tempered by margin pressures from higher operating costs, contract renewal risk, and constrained pricing flexibility with key clients.

UEM Edgenta provides healthcare and facilities management services through its asset management portfolio. Its healthcare segment serves public and private hospitals in Malaysia and, through wholly-owned subsidiary UEMS Pte Ltd, has expanded steadily into Singapore and Taiwan, lowering dependence on HSS concession contracts in Malaysia. In 1H2025, the group secured RM3.0 billion in contracts (2024: RM2.8 billion), comprising renewals and new awards. HSS contributed 83% of the new order book, including RM1.2 billion from Singapore and Taiwan. Domestically, subsidiary Edgenta Mediserve renewed its HSS concession for 32 government hospitals in Peninsular Malaysia on 1 April 2025 for a three-year term, with options for two additional one-year extensions, following the expiry of the previous 10-year contract on 31 March 2025. The shorter renewal term ensures service continuity pending a broader government review for the next tender cycle. Contract terms remain unchanged, while discussions continue regarding a potential upward adjustment in the next cycle to reflect increased operating costs, including the rise in minimum wage.

Through wholly owned Edgenta PROPEL Berhad, the group holds a long-term master maintenance services contract with related company Projek Lebuhraya Usahasama Berhad for highway maintenance, providing an assured income stream through 2038. It also maintains several state roads under contracts with Jabatan Kerja Raya.

Following the acquisition of a 60% stake in United Arab Emirates–based property manager Kaizen Group in February 2024, the property and facilities solutions segment recorded higher revenue of RM167.8 million (1H2024: RM154.6 million). Post-acquisition, UEM Edgenta (through Kaizen Group) and 21 Estates Group FZCO (21 Estates) formed a joint venture (JV) in Dubai (DuaSatu FZ LLC), with UEM Edgenta holding an indirect 40% stake and 21 Estates owning 60%. The JV requires minimal capex, leveraging UEM Edgenta’s technology-driven property management expertise and 21 Estates’ scale, access, and regulatory support to manage city-wide urban development and Expo City Dubai, covering approximately 2.5 million sqm. The JV is expected to generate incremental revenue and support long-term market expansion, contributing meaningfully to group performance by 1H2026. As of 1H2025, revenue from the Middle East remained modest at around 7% (1H2024: 5%), with strategic expansion in the Middle East and higher-margin contracts in Singapore and Taiwan expected to support medium-term earnings.

For 9M2025, revenue declined y-o-y by 3.7% to RM2.1 billion, mainly due to fewer infrastructure services work orders. The group recorded pre-tax loss of RM74.4 million and a negative operating margin of 2.9% (9M2024: RM65.6 million; 3.5%), driven largely by one-off, non-cash impairment charges of RM96.4 million and higher operating costs following the increase in minimum wages from RM1,500 to RM1,700 effective February 2025. Excluding impairments, performance was broadly in line with the previous corresponding period at around RM22.0 million, though margins remain under pressure from regulatory cost increases, particularly in HSS. The impairments have no immediate impact on liquidity.

As at end-September 2025, borrowings stood at RM397.9 million, with a gross debt-to-equity ratio of 0.27x, consistent over the past five years. The RM250 million sukuk due in April 2026 is adequately covered by the group’s RM607.1 million cash balance or refinancing capacity.

Regarding parent company UEM Group’s proposal to privatise UEM Edgenta via a selective capital reduction, MARC Ratings believes the group has the financial wherewithal to execute the transaction without materially weakening its balance sheet. Absent any material change in the business profile, the privatisation is not expected to have an immediate impact on the group’s rating.

Fatin Sadiqah Saberam, +603-2717 2934/ fatin@marc.com.my
Farhan Darham, +603-2717 2945/ farhan@marc.com.my
Yazmin Abdul Aziz, +603-2717 2948/ yazmin@marc.com.my