Blockchain solutions drive MyEG’s earnings

Maybank IB Research said MyEG’s strong results in 3Q23 were driven by the sales of its flagship Zetrix token.

PETALING JAYA: MyEG Services Bhd’s earnings momentum will be driven by its decentralised finance (DeFi) segment that is projected to deliver an even stronger performance in the fourth quarter of 2023 (4Q23).

Maybank Investment Bank Research (Maybank IB Research) said MyEG’s strong results in 3Q23 were driven by the sales of its flagship Zetrix token, which continued to drive growth in the group’s blockchain-solutions segment.

The company touts Zetrix as “next generation layer-1 public blockchain infrastructure”.

For 3Q23, MyEG’s core net profit rose by 7% year-on-year (y-o-y) to RM120.1mil.

The core net profit for the nine-month period of the financial year ending Dec 31, 2023 (FY23) stood at RM338.7mil, beating both Maybank IB and consensus estimates at 82% of FY23 net profit.

“For the second consecutive quarter, the outperformance was driven by its DeFi segment (about 18% of group turnover versus 12% and 8% in 2Q23 and 1Q23, respectively), primarily from accelerating sales of Zetrix tokens,” the research house said in a report yesterday.

MyEG’s turnover in 3Q23 saw a 5% increase quarter-on-quarter (q-o-q) due to 30% sequential growth in the DeFi segment’s contribution.

“Following the successful Oct 28 initial exchange offering on (Singapore-based cryptocurrency exchange) Coinstore for its tokens, we now forecast MyEG will be able to sell about five million tokens (double our prior estimate of 2.5 million units) in 2023, priced at US$5 per unit,” the research house noted.

Moreover, it stated MyEG’s earnings before interest, taxes, depreciation, and amortisation and core net profit margins also saw further q-o-q upticks (up by three percentage points and up by one percentage point, respectively) in the quarter as MyEG’s workforce-downsizing initiatives gathered momentum.

“With management alluding to strong token sales following the October IEO, we expect MyEG’s DeFi segment to deliver an even stronger performance in 4Q23.

“Increasing cross-border transactions between Malaysia and the Philippines utilising Zetrix and the platform’s maiden commercial deployment in China are expected to drive token utilisation further and generate ‘gas’ or tracking fees for MyEG,” Maybank IB Research said.

It maintained its “buy” call on MyEG with a target price of RM1.23 a share and raised its FY23, FY24, FY25 earnings forecast by 10%, 7%, and 3%, respectively.

It identified the prolonged unresolved foreign worker recruitment into Malaysia, higher-than-expected capital expenditure required to further develop the Zetrix blockchain infrastructure, as well as discontinuity of MyEG’s concession with the government to provide e-government IT services, as risks to its call.