Overview. MYEG’s 3QFY21 core earnings grew 12% yoy to RM78m on higher revenue registered during the quarter. This was due to 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: However, on qoq basis, core earnings fell 3% due to lower contribution from JPJ-related services subsequent to the national Enhanced Movement Control Order (EMCO) imposed from May 2021 which led to the closure of Driving Institutes until Sep 8.

Against estimates: Inline. MYEG’s 9M21 core earnings increased 23% to RM235m derived from the full 9 months contributions from new concession and commercial services introduced in 2H20 (MIRT, CDL, MST and MySafeQ), coupled with higher MYEG’s online transaction volumes. Overall, 9M21 core earnings were broadly inline with our and consensus’ estimate at 70% and 72% respectively.

Outlook. We expect MYEG to register a strong 4Q earnings performance following the relaxation of movement restriction orders in Malaysia with better contribution from JPJ-related services as all driving institutes are allowed to operate from Sep 9. Besides, we believe the approval for the Proof of Concept from the Road Transport Department of Malaysia (JPJ) for MYEG to set up an Automated Training and Driving Test System (e-testing) from 1 Dec 2021 to 1 Feb 2022 to provide upside earnings potential to MYEG in 2022 onwards once it is fully commercialised.

Our call. Maintain BUY with RM1.50 TP, pegged at 30x PER on 2021 EPS of 5 sen. We believe this is fair given MYEG’s continuous proactive measures taken to introduce innovative services within its regional presence as well as various business partnerships to expand its commercial businesses further, thus offering attractive long-term earnings story to shareholders.

Source: BIMB Securities Research - 30 Nov 2021