• Overview. MYEG’s 4QFY21 core earnings grew 7% yoy and 3% qoq to RM81m due to 1) higher contribution from Covid-19-related services (MySafeTravel (MST) and MySafeQuarantine (MySafeQ)), 2) increase in transaction volume for new and existing concession services which led to higher contribution from ancillary services i.e. fulfilment of security paper and online renewal insurance, and 3) improve in overall online transaction volumes for existing concession and commercial services as online platform becoming preferable option during the pandemic.

• Against estimates: Below. MYEG’s 12M21 core earnings increased 18% to RM316m mainly attributable to the full 12 months contributions from new concession and commercial services introduced in 2H20 (MIRT, CDL, MST and MySafeQ), as well as higher online transaction volumes from both concession and commercial services. Overall, 12M21 core earnings trailed our estimate at 93% despite revenue being inline with our full year forecast. We cut our FY22’s earnings estimate by 13% as we revisit and increased our net opex assumption on higher MYEG’s marketing cost in promoting its new services.

• Dividend. A final DPS of 1.03 sen was declared in 4QFY21 (4Q20: 1.7 sen), implying a dividend payout of 94%. This brings a total 2021 DPS of 1.28 sen, at only 41% of our 2021’s DPS estimate of 2.2 sen.

• Outlook. We remain upbeat on MYEG’s business prospect following Malaysia’s decision to finally fully reopen its international borders in 2Q 2022 which provides brighter outlook for MYEG’s immigration related services i.e. foreign worker renewal permit and Covid-19- related services. Despite government’s decision to implement quarantine-free travel would affect MySafeQ, however, the relaxation travel rules will surely attract more travellers into the country and boost the uptake for MYEG’s Covid-19 breath test for cheaper and faster option (results within 60 seconds) upon arrival at airport.

• Our call. Maintain BUY with lower TP of RM1.45 TP (from RM1.50), pegged at 30x PER on 2022 EPS of 4.9 sen.

Source: BIMB Securities Research - 28 Feb 2022