• Overview. MYEG reported its 3-month 2019 transition financial year-end which was for period of Oct-Dec 2019. Its core profit grew 18% yoy and 15% qoq despite flat growth in revenue. This was due to lower net opex (staff and advertising cost) registered during the quarter.

• Key highlights. MYEG continues to record a strong EBITDA margin in 5QFY19 at 67%, increase of 10ppt yoy and 9ppt qoq.

• Against estimates: Inline. Overall, FY19 core profit were broadly inline with our expectations at 96%.

• Dividend. A final interim DPS of 2.0 sen was declared, implying dividend payout of 101% and brought its total DPS to 2.5 sen for FY19 (FY18: 1.9 sen).

• Outlook. We remain positive on MYEG business prospects given its growing ancillary business to provide sustainable earnings growth for the long term. Besides, we see its overseas business expansion (Philippines, Indonesia and Bangladesh) as a good strategy for MYEG to reduce its single market exposure over time.

• Our call. Maintain BUY with a DCF-derived TP of RM1.70 (WACC: 8.6%, g: 1%) which implies an FY20/21F PE of 21x/16x. We believe its expertise in IT services and proven track record to provide a competitive edge among its peers

Source: BIMB Securities Research - 28 Feb 2020