MyEG's 9M results beat CGS-CIMB Research's forecast

KUALA LUMPUR: MY EG Services' results for the nine months ended Sept 30 beat CGS-CIMB Equities Research's expectation due to stronger 3Q20 earnings per share (EPS) delivery and made up 77% of its full-year forecast, albeit broadly in line with consensus.

In its research issued on Wednesday, the research house said the Health Ministry’s e-payment concession and improvement in-job matching service following government’s re-hiring programme will driveFY21F EPS growth.

“Reiterate Add rating with a higher RM2.50 TP, based on 23 times CY22F P/E,” it said.

CGS-CIMB Research said MyEG's revenue in 3Q20grew by 9.5% quarter-on-quarter (QoQ).

Driving the increase in revenue were higher Covid-19 health screening tests, higher online sales of groceries through its “Nak Beli” online store and introduction of new services for the Road Transport Department, such as online renewal of motorcycle insurance, road tax and driver’s licence.

Overall, net profit grew by 12.2% QoQ from RM63.1mil in 2Q20 to RM70.7mil in 3Q20.

For the nine-month period, MyEG’s net profit also jumped 9.1% year-on-year (YoY) to RM192.6mil.

MyEG has carried out about 200,000 Covid-19 test screenings since the service was launched at end-June 2020 until October 2020.

“The group targets to conduct 500,000 Covid-19 tests in 2020F,” it said following the government’s announcement recently to require foreign workers in Selangor, Negeri Sembilan, Penang, Sabah, Kuala Lumpur and Labuan to undergo mandatory swab tests, irrespective of sectors, in view of the recent spike in cases among foreign workers.

“This will likely involve c.1.6 million foreign workers,” it added.

CGS-CIMB Research also pointed out the government announced on Nov 12 a new labour recalibration programme to legalise foreign workers in Malaysia for employment by eligible employers in manufacturing, construction, agriculture and plantations.

The programme will run from Nov 16 until June 30 next year.

The research house believes the new re-hiring programme bodes well for MyEG’s job matching service as the group processed 700,000 to 800,000 foreign workers during the previous rehiring programme in 2018.

It also noted that MyEG could also upsell its Covid-19 screening service and foreign worker insurance to prospective employers.

“Reiterate our Add rating on the stock with a higher RM2.50 TP. We peg our valuation to 23 times CY22F P/E, still based on MyEG’s five-year historical mean.

“We also rollover our valuation to end-2021F. MyEG is in the midst of applying for an extension for its tax incentives, which is due to expire in Apr 2021.

“We see potential extension of MyEG’s tax incentives as a key re-rating catalyst for the stock,” it said.

To recap, MyEG’s effective tax rate in FY15-19 hovered between 1% and 2%,which is lower than the statutory tax rate of 24%.
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