KUALA LUMPUR: The selldown of My EG Services share price on Thursday, where it plunged 11% to close at RM1.25, is unwarranted as there is strong earnings growth ahead, UOB Kay Hian Malaysia Research says.
It said on Friday the selldown could be tied to a foreign fund selling its stake, as its foreign shareholding is about 25%, amid a few concerns cited in the market, .
“We feel that the selldown is unwarranted as the company will see 20% earnings growth in FY20 even without contract wins, as long as current concessions remain intact, ” it said as it maintained a Buy with an unchanged target price of RM1.71.
UOB Kay Hian Research said the implementation of 15% foreign worker cap in workforce by 2020 was already fulfilled.
It was unperturbed by the Ministry of Human Resources’ announcement that the government has fixed the total proportion of foreign workers in the country’s workforce at 15% by 2020.
The research house said the 15% target has always been the case and the current two million foreign worker number is still below the 15% cap of 2.2 million, allowing a 10% growth.
“Note that our earnings forecast growth is mainly attributed to higher job matching/replacement services thanks to the unfreezing of foreign worker intake since July 2019 (assuming that the number of foreign works remains at two million.
“Consequently, we expect to see its first sequential growth in 4QFY19 since the General Election in May 2018 and a 20% earnings growth in FY20, ” it said.
The research house also said while the announcement of a new e-visa contract has been delayed for months since mid-19, its channel checks show that the contract award remains intact and it is expecting the government to open the tender by November 2019 and announce the project winner before end-2019.
The reasons are that the present system is crippled by flaws in security lapses, and next year is Visit Malaysia 2020 when the government intends to attract more tourists to Malaysia.
Note that the visa project comprises two categories, namely the: a) system (which ultimately aims to be carried out online), and b) one-stop centre (at physical locations). We gather that there are approximately four million to five million tourists from 10 countries registering under the system annually with an average fee of RM100 per pax, translating into potential earnings of RM200mil.
“There have been talks that the Ministry of Transport is reviewing the road tax system by replacing the conventional sticker with radio frequency identification (RFID). We opine that the RFID will not change the need for a road tax renewal as well as insurance, ” it said.
According to Bloomberg data, BlackRock Inc disposed of 19.43 million shares on Oct 15 and reduced its stake to 0.33% or 11.51 million shares.
Vanguard Group Inc. disposed of 21.11 million shares on Sept 30 and reduced its stake to 1.55% or 53.83 million shares.
At end-August, Dimensional Fund Advisors LP raised its stake to 30.10 million shares or 0.86% after buying 12.42 million shares.