MyEG expanding customer base

  • Business
  • Saturday, 24 Jan 2009

WHILE the outcome of the recent by-election in Kuala Terengganu must have been a disappointment to Senator Datuk Dr Norraesah Mohamad, who campaigned hard for Barisan Nasional, back at her seat at the helm of My EG Services Bhd (MyEG), she feels elated.

The e-service provider reached a new milestone when it was transferred from Mesdaq market to the main board of Bursa Malaysia early this month. The MyEG executive chairman is now focusing her attention on growing the company’s business and is hopeful that MyEG’s transfer to the main board would help garner greater public confidence and enhance awareness of the company’s services.

MyEG is a dominant player in the provision of e-services between the government and the public and business community.

These services include online driving test booking; driving licence, road tax and auto insurance renewal; fuel cash rebate; as well as summon and utility bill payments through its e-service kiosks and Internet websites.

MyEG’s group revenue grew at a compounded annual growth rate (CAGR) of 48.7% from RM10.1mil for its financial year (FY) ended June 2004 to RM49.3mil for FY2008, while the group’s net profit grew at four-year CAGR of 61.7% from RM2.2mil for FY2004 to RM14.8mil for FY2008.

Homeground appeal

“We are providing an inelastic product to the public,” Norraesah says, as she explains the reason she believes MyEG’s business growth would not be affected by the current economic slowdown.

Kevin Khoo of Asia Analytica Sdn Bhd says the business of MyEG is fairly recession-proof. He says the trend of Internet transaction is growing globally, including Malaysia.

He thinks that during challenging economic times, people would prefer to travel less and would rather conduct online transactions. And the demand for MyEG’s e-services is supported by the growing popularity of online services and transactions for convenience and cost-savings, as the public becomes increasingly aware of the benefits of doing things online.

Khoo points out that MyEG’s charges are quite reasonable, with most of its services being tagged at a modest RM2 to RM3 (excluding delivery charges). This is pretty much in line with over-the-counter service charges at post offices, for instance.

Currently, most of MyEG’s e-services users are from the younger generation below the age of 45. But with the Malaysian public becoming increasingly IT-savvy, the company is seeing the older generation (those above 45) catching up with the technology.

Norraesah says the company will continue to enhance the efficiency and effectiveness of its services to boost customers confidence in utilising electronic-based services.

Although MyEG has received enquiries from the Middle East, including the United Arab Emirates, Bahrain and Oman, Norraesah says the group’s focus will remain very much in the local market.

“There is a lot of untapped potential in the Malaysian market, and we will capitalise on these potential,” Norraesah says, adding that the prevailing low rate of broadband Internet penetration in the country is a signal that there is much room for the company to grow its business.

According to the Malaysian Communications and Multimedia Commission, the broadband Internet penetration rate for Malaysia was 17.5% as at the third quarter of last year, compared to 16.6% in the previous quarter.

MyEG’s business growth potential ties closely with the steady growth of broadband Internet usage in the country, says an analyst.

Focus on innovation

According to Norraesah, MyEG’s growth is also underpinned by its ability to roll out new e-services on a regular basis. Towards this end, the company aims to introduce two new services each year.

“We will focus on developing more services to attract a broad customer base,” Norraesah says, adding that there are many types of services at the various government departments that are still transacted over the counter, which MyEG could develop into electronic services.

Such efforts, she says, are in line with the Government’s agenda to promote the use of information and communications technology by getting more of its services provided online for the public’s convenience and its own operational efficiency and improvement on its delivery system. (Under the Ninth Malaysia Plan, the Government has allocated RM572.7mil to improve e-government services.)

An analyst says the strong relationship that MyEG has with the Government and its agencies would continue to give the company the advantage of securing government businesses, which are relatively stable.

Growth drivers

Currently, the Road Transport Department (JPJ)-related services, such as online road tax and driving licence renewal as well as driving-test booking, represent the major driver of MyEG’s group income.

Khoo of Asia Analytica says the market potential for this segment is huge, considering the growing number of vehicle owners and registered drivers in the country.

There is an estimated 15 million unit of vehicles, half of which comprise private cars, in Malaysia currently, and the car insurance premium market is estimated to worth RM4.4bil annually.

MyEG’s online road tax renewal service, which was introduced in the second quarter of last year, has been consistently attracting more than 1,000 transactions daily, with more than 40 ancillary motor insurance premiums sold daily.

“Nevertheless, we have to be mindful that such transactions would be slower every fourth quarter as most vehicle registrations are deferred to the following year for higher resale value,” Khoo explains.

For the first quarter ended Oct 31, 2008, MyEG posted revenue and net profit of RM12.2mil and RM4.2mil, which respectively represented growth of 35.7% and 51.8% year-on-year.

The strong growth was attributable to the growing online road tax renewal services and the acquisition of rival company MySpeed in July 2007, which has since increased MyEG’s share of JPJ-related e-services.

The company is expected to announce its second-quarter results by the end of this month. Khoo says MyEG shares are trading at attractive valuations vis-a-vis its growth potential.

He says the growth of the company is exponential due to the nature of its businesses, and expects the company to be able to achieve a net profit of RM28mil for FY2009.

On the potential entry of three new concessionaires for JPJ online services last November, Norraesah says she believes the Government will reconsider the proposal.

“The Malaysian market is relatively small to support too many players... nevertheless, we welcome fair competition,” she says.

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