UOB Kay Hian Malaysia Research believes that MyEG Services stands to be the sole beneficiary of e-bidding for the vehicle plates.
KUALA LUMPUR: Shares in MyEG Services Bhd’s (MyEG), which has fallen 7% over the past three trading days, has provided investors with an opportunity to accumulate, according to CIMB Research.
“MyEG’s share price came under pressure during the past three trading days but the stock saw strong buying at its near-term support trend line of RM1.94.
“In our view, the selling climax occurred today (March 7), with daily trading volume of close to 30 million shares,” CIMB said.
The research house believed that one of the reasons for the short-term selldown is confusion about the ‘front-end’ and ‘back-end’ processing of illegal foreign workers (IFW),” CIMB said.
“We understand there are five parties involved in the ‘front-end’ processing of IFW: one for Indonesia, one for Myanmar and three for other foreign workers. MyEG is one of three parties allowed to register ‘other’ foreign workers. Registration of an IFW will cost RM1,134.52 says MyEG,” it added.
CIMB noted that MyEG had indicated on its FAQ webpage that it would only accept “front-end” processing of IFWs from countries other than Indonesia and Myanmar.
“We think that investors misunderstood this statement. MyEG makes an average RM100 revenue for each IFW who registers under this rehiring programme, regardless of nationality,” CIMB said.
In February, the Government announced that the rehiring programme would be carried out from Feb 15 to Aug 15, 2016.
“In the first week, we believe that the registration was slow but momentum has picked up over the past 1-2 weeks. This is because the Immigration Department has been conducting regular raids on construction sites, plantations and nightclubs. The IFWs arrested in these raids would be deported to their respective countries,” CIMB said.
As such, businesses are now looking to register the IFWs under their employment as they cannot afford to lose these workers. To make matters worse for employers, the Malaysian government has imposed a hiring freeze on new foreign workers, which means that new labour supply is capped for now.
CIMB said there are four to five million IFWs in the country now. It has conservatively assumed that MyEG will register one million IFWs by June 2016.
“If MyEG only registers 500,000 IFWs in FY16 and another 500,000 in FY17, our FY16 earnings per share (EPS) falls by 12% but FY17 EPS rises by 11.6%. However, our MyEG target price is unchanged, based on 21 times CY17 P/E (in line with the average of its peers),” it said, adding that
CIMB has maintained its FY16-FY18 EPS and target price based on MyEG, based on an unchanged CY17 P/E of 21 times.
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