• Overview. 2Q20 core profit grew 8.5% yoy and 6.7% qoq 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 related services. In addition, MYEG new services (Covid-19 health screening and ‘Nak Beli’ online groceries stores) also contributed to higher revenue in 2Q20.

• Key highlights. In 2Q20, MYEG introduced one-stop portal for Covid- 19 health screening for employees registered as contributors to the Social Security Organisation (SOCSO). As June, management guided that 100k employees had registered with MYEG’s portal and it is estimated 200k employees registered in Aug. Through its collaboration with several panel clinics for Covid-19 health screening, MYEG will receive RM20 fee for every testing.

• Against estimates: inline. Overall, 1H20 core profit was broadly inline with our and consensus’ estimate at 41% and 48% respectively.

• Dividend. A first interim DPS of 0.5 sen was declared, implying 27.5% dividend payout.

• Outlook. We expect better performance in 2H20 attributable by higher volume transactions for Immigration and JPJ-related services, motor vehicle trading related services and Covid-19 health screening. We remain optimistic on MYEG’s long term business prospects given its capability to improve its online positioning by offering new products and penetrating different markets through its existing platform.

• Our call. Maintain BUY with a DCF-derived TP of RM1.70 (WACC: 8.6%, g: 1%) which implies an FY20/21F PE of 21x/16x. We believe this is fair given its expertise within IT space and growing ancillary business to provide sustainable earnings growth for the long term.

Source: BIMB Securities Research - 28 Aug 2020