The e-government services provider delivered another record high core net profit of RM165mil.
PETALING JAYA: MyEG Services Bhd
is expected to see further improvement in its cashflow and balance sheet as its blockchain unit, Zetrix continues to lift earnings.
The e-government services provider delivered another record high core net profit of RM165mil, reflecting robust Zetrix coins sales and growing services’ revenue, said UOB Kay Hian (UOBKH) Research.
“We surmise that MyEG’s blockchain segment contributed revenue of RM79mil in the second quarter ended June 30, 2024 (2Q24) (33% of total revenue), with the bulk of it coming from token sales,” the research house noted.
It pointed out that there may also be cooperation on Malaysia and China’s national ID available on Zetrix’s ecosystem.
“We understand that more than 100,000 sign-ups have been onboarded thus far, which roughly added RM5mil in revenue to the group,” the research house added.
It highlighted that the strong earnings were also complemented by its e-government segment’s steady momentum.
“Positively, cashflow and balance sheet also turned healthier following the meaningful disposal of digital assets,” the research house said.
In 2Q24, MYEG disposed of RM247mil in digital assets which are presumably earlier proceeds from Zetrix token sales.
UOBKH Research said coupled with better operating cashflow on better earnings, net cashflow improved by RM562mil in the first half of this year (1H24).
As a result, MYEG’s balance sheet is healthier with RM649mil versus RM84mil in 1H23. Net gearing also improved to 0.2 times from 1H23’s 0.35 times.
“We remain optimistic on Zetrix’s unfolding potential which will continue to elevate MyEG’s profitability,” it added, maintaining a “buy” for the counter with a target price of RM1.42.
UOBKH Research believes that there will be earnings accretion from the Worldcoin project.
“We understand that MyEG was appointed by Worldcoin to provide infrastructure services and operate the blockchain-enabled iris scanning (RM50 revenue and scan).“There is no major capital expenditure of software integration required for Worldcoin’s iris scanning so the project shall be earnings accretive to MyEG when started,” it explained.
In addition, earnings visibility from the e-government related businesses have remained largely unaffected following the renewal of MyEG’s road transport and immigration concessions last year.
“While the earlier National Integrated Immigration System contract extension (which has since been terminated) and digital road-tax renewals did cast some doubts on the status of MyEG’s relationship with the government, the impact on transaction volume seems to have been minimal as noticed in the past three to four quarterly results with the group continuing to deliver record-high earnings,” UOBKH Research said.It raised its 2024 and 2025 earnings forecasts by 9% and 6% respectively to factor in stronger-than-expected contribution from the blockchain segment.
Meanwhile, BIMB Research has maintained a “buy” recommendation with a revised target of RM1.34 following an upward revision of its earnings forecast.
