• With its dominance in e-government services and rising highspeed internet coverage/penetration, we expect some of the new services would provide structural earnings growth as well as higher traffic.

• MyEG boasts sound fundamentals with strong FCF generation of over RM100m (excluding expansionary capex) while ROEs have sustained well over 30%.

• We raised FY18-20E earnings forecasts by 22-63% on structural earnings growth from the new services; reiterate BUY with a higher RM3.75 TP which implies FY19E PE of 31x.

Growing broadband penetration to benefit MyEG e-services

We believe MyEG’s dominance in e-government services have been strengthened by high speed internet following the HSBB rollout in 2010 and 4G/LTE in 2013. Under the 10/11th Malaysia Plan, the government continues to push for increased high-speed internet coverage under the HSBB2, SUBB and BBGP initiatives which we believe would benefit MyEG.

Adaptable investments are key

Despite the established branding in e-government services, 80% of its revenue are from complementary services (ie. non-government services). We expect the trend would continue as MyEG roll out new services such as the FWAP and job matching services. While these are at risk of initiatives to lower foreign labour dependency and adopt Industry 4.0, we believe MyEG’s established IT platform could easily adapt to accommodate domestic workforce over time.

Strong upgrades

We raise FY18-20E forecasts by 22-63% on contribution from new services (ie. FWAP and job matching) as well as our expectations of higher traffic volume with growing coverage/penetration of highspeed internet as well as MyEG’s established branding within the e-government services segment.

Maintain BUY with a higher TP of RM3.75

We reiterate our BUY recommendation and raised our DCF-derived TP to RM3.75 (from RM2.65) (WACC: 8.6%, terminal growth: 1%). This implies FY18E PE of 43x before easing to 31x in FY19E. We like MyEG for its sound fundamentals; it boasts FCF generation of over RM100m (excluding expansionary capex) and ROEs sustaining over 30%. MyEG also adopts a minimum 30% dividend payout which would provide some returns albeit minimal yield at current prices.

Source: BIMB Securities Research - 8 Feb 2018