• Overview. 4QFY19 core earnings fell 21% yoy on combination of lower revenue and higher net opex. Recall that 4QSepFY18 revenue was boosted by the sale of GST solutions worth RM19.9m. On qoq basis, core earnings grew aided by lower administrative expense.

• Key highlights. FY19 core earnings fell 5% as gains from higher revenue was negated by rising net opex. This was due to increase in marketing costs as well as maintenance and operating expenses for MYEG tower.

• Against estimates: Inline. Overall, FY19 core earnings were inline with our expectations at 99% but trailed consensus at 91%.

• Outlook. Despite FY19’s weak performance, we remain positive on MyEG's long term prospects owing to its established branding and expertise in the IT services space. This should provide an edge over potential competition. Its recent regional foray into the Philippines emboldens its prospects, diversifying single market exposure risk.

• Our call. Maintain BUY with a DCF-derived TP of RM1.70 (WACC: 8.6%, g: 1%) which implies an FY19/20F PE of 25x/21x. We believe this is fair given its proven track record and established presence in the IT services space which could stave off competition.

Source: BIMB Securities Research - 29 Nov 2019