• MYEG received official notification for extension of e-government services contract until further notice as the agreement is yet to be finalised.
• We remain confident MYEG will be awarded the contract given its proven track record and wide scalability for over-the-counter locations (over 1,000 kiosks nationwide). Management expects new concession period for a duration of 3 years.
• We expect higher transaction volume for e-government services through MYEG’s portal post-movement control order (MCO) as the new normal ecosystem has accelerated users’ acceptance and migration towards online services.
• Maintain BUY with DCF-derived TP of RM1.70 (WACC: 8.6%, terminal growth rate: 1%), implying FY20/21F of 21x/16x.

Extension until further notice

MYEG has received an official notification for extension of egovernment services until further notice as the agreement is yet to be finalised despite after temporary extension until 30 June. To recap, on 21 May, MYEG received 1-month extension for e-government services and Immigration related services until further notice as the government requires sufficient time to finalise the agreements. We believe the temporary extension was due to the recent change in government, coupled with the government’s focus to reopen the economy post-Covid-19 pandemic which could have resulted in time constraint to review the agreements.

Contract extension is almost assured

Despite no final date yet on extension of e-government services, we remain confident that MYEG will be awarded the contract given its proven track record in delivering the services, coupled with large scalability for over-the-counter locations (over 1,000 kiosks nationwide). These two factors provide competitive edge over possible new players entering the space, in our view. MYEG anticipates shorter new concession contract of 3 years period (previously 5 years) in tandem with government’s new policy.

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 expect higher transaction volume for egovernment services through MYEG’s online portal post-MCO as the new normal ecosystem has accelerated users’ acceptance and migration towards online services.

Source: BIMB Securities Research - 1 Jul 2020