• MyEG’s 2QFY18 revenue and core earnings surged 23% and 24% yoy underpinned by higher transaction volumes from foreign worker related programme (FWRP) and motor vehicle trading related services. Overall, 1HFY18 earnings were below ours and consensus’ forecasts at 35.4% and 41.5% respectively, but we expect its new business to contribute positively in 2H.

• MyEG declared a first interim DPS of 0.5 sen. This implies a dividend yield of 0.2% at current level.

• We maintain our BUY with a DCF-derived TP of RM3.75 (WACC: 7.4%%, Terminal growth: 1%). This implies a FY18E PE of 42.9x before easing to 31.1x in FY19E.

Earnings surged driven by FWRP

MyEG’s 2QFY18 revenue and core earnings surged 23% and 24% yoy to RM109.2m and RM59.0m respectively. Meanwhile, the group’s 1HFY18 saw a strong core earnings growth of 26.1% to RM111.6m from RM88.5m, in tandem with the increase in revenue of 23.9%. These were underpinned by higher transaction volumes from Foreign Worker Renewal (FWR), Foreign Worker Permit (FWP), introduction of newly-created foreign worker job matching and placement programme) as well as higher contribution from motor vehicle-trading related services. Although 1HFY18 earnings were below ours and consensus’ forecasts at 35.4% and 41.5% respectively, we expect contribution from its new business to kick in prominently from 3Q18.

Higher opex incurred qoq

MyEG’s EBITDA grew 25.4% qoq but witnessed a lower margin that declined by 8bps. This was due to higher operating expenses incurred to support the growth in FWP and higher interest cost from the term loan to finance its newly-acquired building.

Outlook remains strong, forecast unchanged

Subsequent to the end of FWR services on 31 Dec 2017, the group has embarked on a new business division under nonconcession-related services, i.e. on a job matching and placement programme as mentioned above. The programme will match foreign workers registered under the FWR services with employers who require foreign workers. Currently, nonconcession related services represent c.79% of MyEG’s renenue.

Dividend declared

MyEG declared a first interim DPS of 0.5 sen. This implies a dividend yield of 0.2% at current level.

Source: BIMB Securities Research - 27 Feb 2018