Some funds are believed to be just taking a risk-off mode to MyEG as the Government may review the company’s online monopoly.
KUALA LUMPUR: CIMB Equities Research is maintaining its earnings per share (EPS) forecasts and target price for MyEG Services at RM3.04 – an upside of 36.3% % from the last traded price of RM2.23.
It said on Tuesday this was based on an unchanged 25.2 times 2019F P/E, a 20% premium over the technology sector.
“The premium is to reflect its large market capitalisation and 36% FY18-20F EPS compound annual growth rate (CAGR). The successful nationwide launch of GST monitoring system (GSTM) phase two is a potential re-rating catalyst. Risks are further delays in the GSTM Phase 2 project,” it said.
Last Thursday, the Competition Appeal Tribunal (CAT) dismissed MyEG’s appeal against the Malaysia Competition Commission’s (MyCC) decision to fine it RM2.27mil for allegedly abusing its dominant position in managing the online foreign workers permit (PLKS) renewals.
In addition, the commission imposed an additional RM7,500 daily penalty from January 2015 to Oct 6, 2015, resulting in a total fine of RM6.4mil.
According to MyCC, MyEG must also provide an efficient gateway for all its competitors in the market for the sale of mandatory insurance and allows other players to compete at the same level within 60 days.
“The announcement is negative for MYEG but we expect minimal impact on its share price as the total RM6.4mil penalty is equivalent to only 2.2% of our FY18F net profit forecast.
“In addition, MyEG indicated it had reviewed the CAT’s decision with the company’s legal counsel and intends to seek a judicial review and also apply for a stay against the CAT’s decision.
“As for the requirements on the gateway, the company said that it already complied with the MyCC’s requirement,” it said.
CIMB Research also said the registration of illegal foreign workers (IFW) is slated to have been completed by end-2017.
It estimated that at end-June 2017, MyEG registered around 500,000 IFWs and it should have reached the one million mark by year-end.
MyEG gets RM100 for every IFW registered. In addition, it gets commissions from insurance companies selling the compulsory foreign workers insurance (FWI). MyEG receives circa RM60 to RM70 in commission from each compulsory FWI policy it sells.
CIMB Research also pointed out that in September 2017, MyEG started a new service of matching employers with IFWs.
This service allows employers to source for new foreign workers and MyEG gets RM1,000 for each IFW it matches with an employer.
“We also expect MyEG to benefit from selling compulsory FWI to the employers. We estimate the company places out 5,000 foreign workers monthly or 60,000 foreign workers annually, generating an average of RM60mil revenue and RM30mil profit before tax annually. Remains an Add,” it said.
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