• Overview. MYEG’s 3Q20 core profit grew 20.3% yoy and 11.2% qoq on higher contribution from concession related services and ancillary services; Immigration and JPJ-related services, motor vehicle trading related services, financing services, sales of tax monitoring system, employees health screening for Covid-19 and ‘Nak Beli’ online groceries stores.
• Key highlights. MYEG reported a sustainable EBITDA margin level between 55-60% over the past several quarters. This was due to its attractive business model which requires low opex as it can maximise the existing platform for new services.
• Against estimates: below. Overall, 9M20 core profit trailed ours but inline with consensus’ estimate at 64% and 74% respectively. We believe the lower-than-expected earnings’ estimate was due to our optimistic assumption on concession-related services for Immigration segment
• Outlook. Nevertheless, we remain positive over its long-term business prospects owing to its capability to secure new projects from the government and expand existing businesses through new value-added services for its users.
• Our call. Earnings forecast and TP of RM1.70 are currently under review as we revisit our Immigration-related services assumption and pending updates from the management on new businesses contribution to the company.

Source: BIMB Securities Research - 25 Nov 2020