• MYEG Philippines had successfully enrolled 300 merchants within 8 months since collaboration commenced with LANDBANK. This resulted in average transaction volume doubling yoy to 40,000 per day from 20,000.
• We are positive on this development as we see strong pick up in transaction volume to provide potential earnings growth for MYEG Philippines in the long-term.
• We make no change to earnings estimate for now as MYEG Philippines is still in early stage.
• Maintain BUY with a DCF-derived TP of RM1.70, implying FY20/21F PE of 21x/16x. We remain positive over MYEG long term business prospect given shifting in consumer behaviour towards digital platform and continuous government’s efforts to adopt e-government services.

Positive development

MYEG Philippines had successfully enrolled 300 merchants through its online services partnership with Land Bank of the Philippines (LANDBANK). Onboarding of 300 agencies and merchants within 8 months since the collaboration commenced in Nov 2020 is on track with MYEG’s plans to integrate all LANDBANK’s 700 enrolled merchants within the next 12 months. Currently, MYEG Philippines has over 40,000 over-the-counter locations.

Strong transaction volume expected ahead

We are positive on this development as we see potential earnings growth for MYEG Philippines in the long-term as MYEG’s platform is providing the country with convenience and ease of access for government services. Since the collaboration in Nov 2019, MYEG Philippines’ average transaction volume is growing tremendously to 40,000 per day currently from 20,000 per day. Management alluded that the average processing fee is US$0.50 per transaction of which 50-60% would be attributed to MYEG.

No change to earnings estimate

We make no change to our earnings forecast for now as e-government services in the Philippines is still in early stage. In 2019, MYEG Philippines recorded a strong growth in revenue of 68% yoy to RM11.8m. However, earnings were dragged down by huge marketing and overhead cost which resulted in a loss of RM1.4m.

Maintain BUY with TP of RM1.70

Maintain BUY with a DCF-derived TP of RM1.70 (WACC: 8%, terminal growth rate: 1%), implying FY20/21F PE of 21x/16x. We remain positive over MYEG long term business prospect given shifting in consumer behaviour towards digital platform and continuous government’s efforts to adopt e-government services.

Source: BIMB Securities Research - 4 Aug 2020