PETALING JAYA: An off-market transaction where the major shareholders of MyEg Services Bhd disposed of 1.4% of the e-service provider has sparked off speculation of a new shareholder in the company.
Asia Internet Holdings Sdn Bhd, the private company controlling MyEG disposed of the 50 million shares in a transaction that took place on Aug 16. Following this transaction, Asia Internet still owns 1.04 billion shares or 29.26% interest in the company.
Sources said the purchaser of the block of shares was a person connected to the Pakatan Harapan administration and expected to bring some sense of stability to the company in terms of its relations with the current government.
“MyEG has come under pressure since May 9 when the Barisan Nasional government was toppled. This is because there were concerns on the business going forward as it is related to providing government e-services.
“Although the company has said several times that almost 80% of its revenue are from commercial transactions, the view is that the certainty of earnings for MyEG is from its e-services transactions with government departments,” said the source.
MyEG is known for providing e-government services for transactions involving the Road Transport Department (RTD) and Immigration Department. The services range from renewal of road tax, workers permits and insurance.
Last year it went into providing accommodation for foreign workers with a pilot project in Melaka and another in Johor.
Asia Internet is a company that is held by MyEG executive chairman Datuk Norraesah Mohamed and managing director Wong Thean Soon. Apart from the stake in Asia Internet, Wong also directly own 8.64% in MyEG.
The married deal was first announced to Bursa Malaysia on July 31. At MyEG’s Sept 6 closing price of RM1.65, this represents a 37.5% premium from the transaction price of RM1.20.
Since this married deal was done, shares of MyEG have been rallying with speculation that the new strategic shareholdings coming into the company would give it some certainty in its dealings with the RTD and Immigration.
One of Pakatan’s objective is to do away with monopolies. However the e-government services market is already competitive and contracts are short term in nature of between three and five years.
“It is not long term unlike toll road or power plant concessions. So new players may come into the market,” said an investment banker.
However a fund manager said that MyEG has the competitive advantage because it has the structure in place and its mass market.
“A new player would have to fork out money and build a market. That would take time,” said the fund manager.
MyEG, which had a market capitalisation of some RM9.5bil prior to the general election (GE14), lost 73% of its value following the GE14 results. Its share price, which had hit a high of RM2.89 on March 30 this year, touched a low of 68.5 sen on June 4.
In June, its contract with the Immigration Department to carry out the government’s rehiring exercise of undocumented foreign workers ended.
This added to the pessimism surrounding the stock.
However the company said the contract was already scheduled to end following the government’s move to stop the illegal foreign workers rehiring programme in 2017.
At RM1.65, MyEG has a market capitalistion of RM5.9bil. At this price, the stock is trading at a price earnings ratio of 26.35 times.
For the three months to June 30, 2018, MyEG recorded a net profit of RM56.11mil on the back of RM226.49mil revenue. For the full year, it recorded net profit of RM107.44mil on the back of RM426.24mil revenue.
MyEG is in the process of changing its financial year, hence there being no comparative numbers for the quarter ended June 30, 2018.
The financial year-end of the group has been changed from June 30 to Sept 30.
As such, the next set of audited financial statements shall be for a period of 15 months from July 1, 2017 to Sept 30, 2018.
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