• Overview. 1QFY20 core earnings increased marginally yoy in tandem with higher volume transactions for Immigration and JPJ-related services, motor vehicle trading related services, financing services, sales of tax monitoring system and foreign worker recruitment & replacement related services. On qoq basis, core earnings fell 14.9% despite the increase in revenue. This was negated by higher net opex resulted from imposition of Movement Control Order (MCO).
• Against estimates: Inline. Overall, 3MFY20 core earnings were broadly inline with ours and consensus’ estimate at 20% and 22% respectively.
• Outlook. We remain optimistic on MyEG's long term business prospects given its expertise within the IT services space to provide sustainable earnings growth. Despite the imposition of MCO and lockdown in Malaysia, Philippines and Indonesia, MYEG’s online portal remains uninterrupted and operates as normal. In addition, MYEG has proven its capability to adapt well during the period by offering new services, i.e. online food service platform, online ‘Zakat Fitrah’ payment, Covid-19 contact tracing and one-stop portal for Covid-19 screening test for employees under SOCSO’s Prihatin Screening Program (PSP).
• 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 IT infrastructure could stave off competition.

Source: BIMB Securities Research - 30 Jun 2020