• 2QFY19 core earnings fell 0.9% yoy and 1.1% qoq despite higher revenue. This was due to higher net opex and higher taxation incurred during the quarter.

• Overall, 1HFY19 core earnings were inline with ours but trailed consensus’ estimates at 49% and 42% respectively.

• Declared 0.5sen dividend, implying a dividend yield of 0.3% at current level.

• Maintain BUY with DCF-derived TP of RM1.70 (WACC: 8.6%%, g: 1%). We remain positive on MyEG given its strong business prospects within IT services which could provide structural earnings growth to the company.

Dragged by higher net opex and taxation

2QFY19 core earnings fell 0.9% yoy to RM58m despite 9.0% increase in revenue. Lower earnings were due to higher net opex (from marketing and maintenance expenses for MYEG Tower) and higher taxation (from increase in non-tax deductible contribution business ie. vehicle financing from MyCar).

Improved in sales offset by higher taxation

On qoq basis, revenue grew 4.7% to RM121.7m mainly due to higher contribution in commercial services ie. financing services, sales of tax monitoring system to joint venture company in Indonesia and the Cardbiz business. However, the marginal improvement in revenue was offset by higher taxation during the quarter. As a result, core earnings fell 1.1%.

1HFY19 earnings within expectation

1HFY19 core earnings were flat despite 8% increase in revenue. This was dragged by higher net opex and taxation incurred during 2QFY19. Overall, core earnings were inline with ours at 49% but trailed consensus’ estimates at 43%.

Dividend declared

A first interim DPS of 0.5sen was declared. This implies a dividend yield of 0.3% at current level.

Maintain BUY at TP of RM1.70

We maintain our BUY call on the stock with a DCF-derived TP of RM1.70 (WACC: 8.6%, g: 1%) which implies an FY19/20F PE of 25x/22x. We remain positive on MyEG given its strong business prospects and establish branding which could provide structural earnings growth to the company.

Source: BIMB Securities Research - 31 May 2019