• MYEG Philippines launched phase 1 of the e-government services in partnership with Land Bank of the Philippines (LANDBANK) enabling Filipinos to do online and offline transactions with enrolled government agencies and merchants.

• We are positive on this development as we see potential growth in transaction volume driven by growing internet penetration rate and government support towards cashless payment.

• No change to earnings estimate as it is still in early stages but we expect transaction volume to pick up in the near term.

• Maintain BUY with a DCF-derived TP of RM1.70, implying FY19/20F PE of 26x and 22x respectively. The Philippines market allows MYEG to expand e-government services and better manage its single-market risk over time.

e-government services is now in the Philippines

MYEG Philippines launched its 1st phase of e-government services in partnership with Land Bank of the Philippines (LANDBANK). Under phase 1, Filipinos is able to transact online through MYEG Philippines’s portal with LANDBANK’s enrolled government agencies and merchants. Currently, MYEG Philippines has over 40,000 over-thecounter locations.

Potential volume to pick-up in short term

We are positive on the announcement given the potential structural growth it provides and MYEG reducing its single-market risk over time. Philippines internet penetration rate is on the rise, at 65% in 2018. The service would enable the government to enhance efficiency. Management noted that the average processing fee is US$0.50 per transaction of which 50-60% would be attributed to MYEG.

No change to earnings for now

We make no change to our earnings forecast for now as e-government services in the Philippines is still in early stage. Still, we expect transaction volume to pick up in the near term.

Maintain BUY with TP of RM1.70

Reiterate BUY with a DCF-derived TP of RM1.70 (WACC: 8%, terminal growth rate: 1%), implying FY19/20F PE of 26x/22x. We see this as a good strategy for MYEG to reduce its single market exposure. Besides, we remain optimistic on MYEG for its solid business prospect in egovernment services, IT expertise and good track record to stave off competition.

Source: BIMB Securities Research - 21 Nov 2019