CIMB Research sees My EG oversold, keeps TP RM1.81

IT-related services counters such as My EG were among the top gainers

KUALA LUMPUR: CIMB Equities Research believes the plunge in My EG Services share price last Friday by 30% to a low of RM1.05 could be an opportunity to accumulate the stock. 

It said on Monday the key earnings driver for the stock in FY19-20F is the online registration of new foreign workers (NFWs) which MyEG has recently received the approval for from the government.

“We have assumed in our conservative earnings forecasts that MyEG recruits and registers 50,000 NFWs annually in 2019/20F. We understand that the company could generate around RM2,000 revenue per NFW. 

“Based on these assumptions, MyEG could generate around RM100mil revenue annually, and assuming 50% net profit margin, MyEG’s annual net profit could rise RM50mil,” it said.

CIMB Research maintained its EPS forecasts and target price, based on 21 times 2019F P/E (40% premium to its technology sector 2019F P/E target of 15 times). 

It pointed the stock was only trading at 13.0 times 2019F P/E after Friday’s decline by 30%. 

“Potential re-rating catalysts are stronger-than-expected registration of NFWs and securing the Sales and Services Tax (SST) monitoring contract. Downside risks to our call include the failure to win any new projects and weaker-than-expected earnings,” it said.

My EG resumes trading on Monday after halting trading at midday on Friday to release a press statement to Bursa Malaysia that its company was not implicated in the charges against former deputy prime minister Datuk Seri Ahmad Zahid Hamidi.

Last Friday, he was slapped with 45 charges of corruption and criminal breach of trust (CBT).

Ahmad Zahid has been charged with receiving RM13.25mil from Mastoro Kenny IT Consultation & Services between July 2016 and February 2017 to secure a MyEG project.

“We contacted MyEG managing director TS Wong about this issue this (Friday) morning and he indicated that he has never met anyone from Mastoro Kenny IT before,” it said

My EG also announced Malaysian Anti-Corruption Commission’s (MACC) clarification that My EG and its board are not under investigation and are not a party to the investigations leading to the charges against Ahmad Zahid.