• MYEG received temporary extension on 21 May 2020 from the government for e-government services and Immigration related services.
• The extension of MYEG’s concession agreements is something we have been anticipating upon its expiry given its strong and proven track record in delivering the services. Management expects new concession period for a duration of 3 years.
• MYEG has proven its capability even during lockdowns and MCO in the Philippines and Malaysia, by offering new services through its platform.
• Maintain BUY at TP of RM1.70, implying FY20/21F of 21x/16x.

Extension of concession agreements
MYEG received an official notification from the government to continue e-government services until 30 June 2020 and Immigration related services (i.e. renewal of foreign worker’s permit) until further notice. The temporary extension is given to MYEG for now as the government requires sufficient time to finalise the agreements. We believe this is due to Malaysia’s recent change in government, coupled with the government’s focus to curb the spread of Covid-19 by implementing Movement Control Order (MCO) since March 2020. These had resulted limited time for the government to review any new contracts award or extension during this period.

Extension of contract is anticipated
The extension of MYEG’s concession agreements is something we have been anticipating upon its expiry on 22 May 2020. This is backed by its proven track record in delivering the services since 2000. Management expects MYEG to be awarded a new concession for a period of 3 years.

Well-adapting business Following the imposition of the lockdown and MCO in the Philippines and Malaysia, MYEG has proven its capability to adapt by offering new services, i.e. online food service platform (Nak Makan), online ‘Zakat Fitrah’ payment for 6 states, Covid-19 contact tracing (MyEGuard) and one-stop portal for Covid-19 screening test for employees. In addition, we expect to see increase in volume of transactions through MYEG’s online platform as government’s counters were closed during MCO. We believe this has created a “new normal” of conducting transactions among the public.

Maintain BUY at RM1.70 TP. Maintain 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 this is fair given its sustainable earnings growth in e-government services and ancillary business. Besides, we see overseas business expansion (Philippines and Indonesia) would reduce MYEG’s single market exposure.

Source: BIMB Securities Research - 27 May 2020