MyEG Services at a major turning point

My EG Services is among the five Malaysian companies on Forbes

KUALA LUMPUR: CIMB Equities Research views MyEG Services is at a major turning point now with positive developments from the Goods and Services Tax (GST) monitoring project and the registration of illegal foreign workers (IFWs).

It said on Wednesday with the approval of the GST monitoring project already finalised and registration of IFWs likely to pick up over the next few months, all is looking positive for the company. 

“Further developments in the foreign worker hostel accommodation project should help boost investors’ sentiment in the stock,” it said.

CIMB Research maintained its EPS forecasts and target price, based on unchanged 25.2 times 2018 price-to-earnings (P/E), a 20% premium over the technology sector target of 21 times P/E.

It said the premium is justified by its 53.6% 3-year earnings per share (EPS) compounded annual growth rate (CAGR). Potential re-rating catalysts for the stock are stronger-than- expected registration of IFWs and the successful launch of the GST monitoring project in 1QCY17. Risks are weak registration of IFWs.

It cited reports that the Immigration Department has imposed its heaviest ever sentence on employers who still use IFWs. Two Bangladeshis are to be jailed for 20 years and whipped, while four Malaysians fined RM480,000 or nine years’ imprisonment.

It also pointed out a report that 70%-80% SMEs still use IFWs.

“While the government has not made any more announcements on the rehiring programme, MyEG’s website shows that this programme is still ongoing. However, the company did not indicate the numbers of registered IFWs so far. 

“We target one million IFWs to be registered in FY16 and FY17 in total. This could surprise on the upside if more SME employers register their IFWs.

“MyEG gets a RM100 registration fee for every IFW registered and another RM70-RM80 if the employers buy compulsory foreign workers’ insurance from MyEG. 

“On top of that, MyEG also gives Celcom SIM cards to the registered foreign workers to use and report employers who mistreat their foreign workers to the authorities. There is a revenue sharing agreement with Celcom if the foreign worker uses a Celcom SIM card,” it said.