CIMB Research keeps forecasts, target price of MyEG Services

Employers reregistering their workers at MYEG makeshift counter outside Penang Immigrations Department in Butterworth, Penang. Star pic by Asri Abdul Ghani

KUALA LUMPUR: CIMB Equities Research is keeping its forecasts and target price of RM1.22 for MyEG Services, still based on a technology sector 2019F target price-to-earnings (P/E) of 15 times. 

It said on Thursday a potential re-rating catalyst is MyEG winning a contract to monitor Malaysia's upcoming Sales and Services Tax (SST). 

“A downside risk is liberalisation of the domestic car roadtax and foreign worker working permit renewal services, which may open MyEG’s niche segment to other players,” it said.

On Wednesday evening, MyEG announced that its associate I-Pay MyEG Philippines Inc (IPMPI) had inked an MoU with Cagayan Economic Zone Authority (CEZA).

The MoU would allow IPMPI to be registered as a financial technology solutions business enterprise (FTSBE) licence applicant to act as a payment processor and payment gateway business enterprise for offshore transactions in the Philippines, specifically within the Cagayan Special Economic Zone and Freeport (CSEZFP),

“This is potentially positive for MyEG. We understand CEZA is the second regulator in Asia to legalise and regulate cryptocurrency exchanges, the first being Japan.

“We learnt from MyEG that IPMPI is expected to operate a payment gateway for the cryptocurrency exchanges operating in the Philippines, where people can deposit money into their crypto accounts using their credit cards. MyEG expects IPMPI to get 0.2% of the credit card fund inflows,” CIMB Research said.

The research house said depending on how fast and how big the cryptocurrency exchanges take off in the Philippines, this could be a huge business for IPMPI over the next few years. 

MyEG set up its 40%-owned Philippine JV, I-Pay Commerce Ventures (IPCV) in March 2017 to provide e-government services. This JV provides e-government services for the police, Labour Department and some cities in the Philippines. 

Within a year, it is already handling around 20,000 e-transactions daily. IPCV charges around 40 cents per transaction and annual revenue is currently generates is only around US$1.8mil (RM7.2mil).

CIMB Research said what could be exciting for IPCV over the next few months is the potential tie-up with a regional bank to offer micro loans to Philippine citizens. 

“We understand the average micro loan in the Philippines is around US$1,000 (RM4,000). MyEG believes the demand for micro loans will be strong, and targets a 20%-30% take-up rate from customers of IPCV, with IPCV potentially getting US$25 commission per micro loan (which is 2.5% commission on a US$1,000 loan),” it said.