• MyEG reported its 3-month Sep 2018 (Jun-Sep) performance in which core earnings amounted to RM76m, to come inline with our estimate.

• Core earnings surged both yoy and qoq due to higher contribution from concession related services, commercial services and sales of solutions related to GST abolishment.

• Maintain BUY with a DCF-derived TP of RM2.60 (WACC: 7.4%%, g: 1%). This implies FY19F PE of 26x before easing to 21x for FY20F.

Amazing closing

MyEG reported its 3-month 2018 transition financial year-end which was over Jul-Sep 2018. Its core earnings surged 45% yoy and 35% qoq to RM76m. We arrive to the figure after adjusting for EI amounting RM171.7m in relation to the abolishment of the Goods and Services Tax (GST). During the quarter under review, revenue increased 41% yoy and 29% qoq owing to higher contribution from concession related services (foreign worker renewal permit and road tax renewal), commercial services (motor vehicle trading related services, financing services and Cardbiz business) and recognition of deferred revenue, worth RM19.9m, from the sale of solutions related to GST abolishment. Overall, core earnings were inline with ours at 99% estimates.

Bright outlook

Despite the change of new government, we remain positive over MyEG's strong branding and established IT infrastructure as we believe it would be able to stave off competition in delivering e government services. Besides, we see its plans to expand the business regionally into the Philippines, Bangladesh and Indonesia as a huge growth potential growth. In addition, we expect its new project; PayME – payroll system based on blockchain technology to provide further growth in FY19.

Maintain BUY at RM2.60 TP

Reiterate BUY with a DCF-derived TP of RM2.60 (WACC: 8.6%, g: 1%) which implies FY19F PE of 26x before easing to 21x for FY20F. We remain positive over its long term prospects as we believe it could capitalise on its dominance by providing complementary services as well as diversifying into regional markets would further reduce its risk towards a single market exposure.

Source: BIMB Securities Research - 30 Nov 2018