• Overview. MYEG’s 2QFY21 core earnings grew 28.1% yoy to RM81m in tandem with its strong revenue growth on 1) contribution from new concession services (online renewal motorcycle insurance and road tax (MIRT) and Competent Driving License (CDL)), 2) contribution from new commercial services from its Covid-19-related services (MySafeTravel (MST) and MySafeQuarantine (MySafeQ)) and ‘Nak Beli’ online store, and 3) increase in overall online transaction volumes on existing concession and commercial services.

• Key highlight: On qoq basis, core earnings increased 5.9% on lower net opex recorded during the quarter despite revenue was affected from the temporary closure of Driving Institute due to movement control order (MCO). MYEG continues to report a strong EBITDA margin level with its 2Q21’s EBITDA margin expanding 5.8ppt to 57.9% from 52.1%.

• Against estimates: Inline. MYEG’s 1H21 core earnings surged 28.6% to RM157m underpinned by increased in online transaction volumes for both concession and commercial as more users opted for online transactions to reduce the risk of Covid-19 infection. The improvement in YTD’s core earnings was also backed by contribution from new services (MIRT, CDL, MST and MySafeQ) introduced in 2H20. Overall, 1H21 core earnings were broadly inline with our and consensus’ estimate at 46% and 49% respectively.

• Dividend. A 1st interim DPS of 0.25 sen was declared (2Q20: 0.50 sen), implying a dividend payout of 12%.

• Outlook. We remain optimistic on MyEG's long-term business prospects owing to growing e-government transaction volumes, expansion in concession-related and commercial business. MYEG has proven its creativity and capability to adapt well during the Covid-19 pandemic by introduce innovative online services (MIRT, CDL, MST, MySafeQ) which benefit users throughout this challenging time.

• Our call. Maintain BUY with RM3.00 TP, pegged at 30x PER on 2021 EPS of 10 sen.

Source: BIMB Securities Research - 24 Aug 2021