• MYEG’s 1Q22 core earnings grew moderately or by 7% YoY despite recording a decline in revenue following a change in the management’s strategy. Its core earnings were backed by lower operational cost, which saw EBITDA margin expanded by 7.7-ppts YoY to 60%.

• We are upbeat on MYEG’s earnings outlook given the reopening of international borders where this will boost its foreign worker segment and offset flattish growth in MYEG’s COVID-19 related services.

• MYEG earnings are expected to grow at a 3-year CAGR of 11% to be driven by growing concession and ancillary services. This will be aided by MYEG’s good track record and capability to capitalise on existing business through the introduction of innovative services.

• We reiterate our BUY call on MYEG at a new TP of RM1.65, pegged at 30x PER to 2023F EPS of 5.5 sen as we roll valuation to 2023.

1Q22 in a Glance

MYEG started its financial quarter of 2022 steadily following a 7% increase in core earnings despite reporting a decline in revenue due to a change in management strategy for its MySafeQuarantine (MySafeQ) services. MYEG also continued to record higher transaction volume for its concession and ancillary services during the quarter. The improvement in MYEG’s core earnings were backed by lower operating costs from its MySafeQ services which saw EBITDA margin expanded by 7.7-ppts YoY to 60%.

Brighter Outlook Ahead

The reopening of international borders and the steady arrival of foreign workers in Malaysia are expected to boost to MYEG outlook amid an increase in immigration-related services that will more than offset a flat growth for MYEG's Covid-19-related services. We expect MYEG’s core earnings to grow at a 3-year of CAGR of 11% over 2021-2024F on stronger contribution from concession and ancillary services following growing online transaction volume. This will be added by MYEG’s good track record and capability to capitalise from existing business which includes the introduction of innovative services and venturing into new technology (Blockchain). These are all potential earnings accretive for the group in the long run.

Maintain a BUY call with new TP of RM1.65

We maintain a BUY call on MYEG with a new target price (TP) of RM1.65 as we roll our valuation to FY23. We view the decline in MYEG’s share price as overdone as the stocks deserves higher valuation prior to 15th GE. Any price dip should provide an opportunity to accumulate.

Source: BIMB Securities Research - 4 Jul 2022