• MyEG’s 1QFY18 core earnings surged 29% yoy underpinned by higher transaction volumes to trail ours and consensus forecasts at 19.8% and 19.6% respectively.

• Sequentially, earnings fell 11.7% qoq as 4QFY17 earnings were boosted by last-minute surge in the Foreign Worker Rehiring (FWR) service due to the E-Kad deadline application on 30 June 2017.

• We maintain our BUY recommendation with higher TP of RM2.65 with 10-year DCF (WACC: 7.4%%, Terminal growth: 1%). This implies a FY18E PE of 37x before easing to 31.8x in FY19E.

Strong yoy performance

MyEG’s 1QFY18 core earnings surged 28.5% yoy underpinned by higher transaction volumes from Renewal Foreign Worker (RFW), Foreign Worker Rehiring (FWR) and complementary insurance services as well as motor vehicle trading related services. Overall, it trailed ours and consensus’ forecasts at 19.8% and 19.6% respectively.

Qoq decline in FWR volume

MyEG’s 1QFY18 core earnings fell 11.7% qoq, in tandem with 6.7% revenue decline. This was primarily due to a last-minute surge in FWR and foreign workers’ insurance services in 4QFY17 as application deadline for E-Kad was on 30 June 2017. The FWR has since been extended by the Home Ministry until 31 Dec 2017 amidst poor response from employers.

Outlook remains robust

MyEG has diversified its principal activities (e-Gov services) to include foreign workers accommodation programme. This is expected to add c.25% to EBIT. The group also has embarked new business division under non-concession related services on a job matching and placement programme which will reflect to its FYE18 earnings.

Maintain BUY with higher TP of RM2.65

We maintain our BUY recommendation with higher TP of RM2.65 as we roll forward our earnings forecast. Our target price is based on 10-year DCF (WACC: 7.4%%, Terminal growth: 1%). This implies a FY18E PE of 37.0x before easing to 31.8x in FY19E. We like the stock for its sound fundamentals while we believe it has bright earnings prospect lending to its strong brand equity within the e-government services as well as the government’s growing need to expedite various permit applications.

Source: BIMB Securities Research - 30 Nov 2017