• MYEG is offering one-stop portal for employees and foreign workers in Malaysia for the Covid-19 screening test under SOCSO’s Prihatin Screening Program (PSP).
• We see MYEG’s one-stop portal would provide mass Covid-19 testing assistance for the government. This is in tandem with SOCSO’s aim to conduct 100,000 monthly testing.
• No change to earnings forecast as it is still early to gauge the participation rate through MYEG portal. Still, we expect 7 million employees to register under PSP.
• Maintain BUY at TP of RM1.70, implying FY20/21F of 21x/16x respectively.

One-stop portal for Covid-19 screening test

MYEG is offering one-stop portal for employees in Malaysia, including foreign workers who are registered as contributors to the Social Security Organisation (SOCSO) for the Covid-19 screening under its Prihatin Screening Program (PSP). Upon completion of the screening, MYEG will issue a dynamic QR colour code on mobile apps indicating the test status for verification purposes. Since the launch of PSP on 27 Apr, over 300,000 employees had registered through SOCSO’s website.

Mass Covid-19 testing expected ahead

We are positive on the announcement as we expect MYEG’s portal for PSP to provide potential earnings contribution to its ancillary business. Besides, this would be a great assistance for the government to boost Covid-19 testing and in tandem with SOCSO’s target to conduct 100,000 tests monthly, translating to approximate 3,300 daily testing. As at 11 May, Malaysia had done over 260,000 testing, averaging 5,000 daily testing (Chart 1). Management revealed that MYEG is collaborating with several panel clinics for the PSP and will receive RM20 fee for every testing. In addition, MYEG claims these panel clinics are able to conduct total screening tests up to 10,000 per day.

No change to earnings

We have a positive view on this latest venture, but we make no change to earnings forecast for now as it is still early to gauge the participation rate through MYEG portal. Based on our assumption of SOCSO’s active contributors which represents c.40% of total labour force in Malaysia (2019: 17.6 million) (Table 1), we expect 7 million employees to register under PSP.

Reiterate BUY at RM1.70 TP.

Reiterate BUY with a DCF-derived TP of RM1.70 (WACC: 8.6%, terminal growth rate: 1%), implying FY20/21F PE of 21x/16x. We believe its expertise in IT services and proven track record in e-government services as well as its capability in offering complementary services to the public has set a high benchmark for new players to enter the market.

Source: BIMB Securities Research - 14 May 2020