• MyEG’s 3Q17 core profit grew strongly by 63% yoy and 13% qoq, boosting 9M17 earnings growth to 54.5% to RM142m which is in-line with our expectations at 77%.

• The strong performance was driven by higher transaction volume of foreign worker’s permit (FWP), foreign worker rehiring (FWR) program services, foreign workers’ insurance and increase in motor vehicle trading related services.

• We MyEG’s earnings prospect remains positive ahead of major government projects in the horizon.

• Our recommendation and TP is currently under review.

Strong performance from FWP and FWR

MyEG’s 3Q17 earnings grew strongly by 63% yoy to RM53.9m. This was mainly driven by higher transaction volumes from the online renewal of foreign worker’s permit (FWP), foreign worker rehiring (FWR) program services as well as the complementary insurance business. Overall, MyEG’s 9M17 earnings were in-line at 77% of our FY17E earnings forecast.

Higher contribution from concession services

The 9M earnings surged 54.5% to RM142m while EBITDA margin expanded 3ppts to 63.7%. The growth was underpinned by the FWP and FWR services as well as higher contribution from the JPJ-related services and motor vehicle trading services.

Qoq improvement

On qoq basis, 3Q17 core profit grew 13.2% underpinned by the FWP and FWR services. Overall, this led to EBITDA margin expanding by 6.7ppts. However, net margin only expanded by 0.6ppts to 54.3% as most of the improvements were partially offset by higher overheads incurred.

Outlook looks favourable

We believe the earnings outlook for MyEG remains positive on the back of several government-related projects in the horizon such as introduction of the GST monitoring system. While the company continues to strive to have a more diversified income stream from non-government sources, much of its initiative has yet to meaningfully materialize. Nonetheless, we note that its ROE continues to remain robust, sustaining above over 30%.

Recommendation and TP under review

Our recommendation on MyEG is currently under review as we undergo a material restructuring of our coverage.

Source: BIMB Securities Research - 31 May 2017