• Overview. My E.G Services (MYEG) 2Q22 core profit rose by 10% YoY and 8% QoQ to RM88.7mn despite an almost flat revenue. The improvement in core profit was mainly driven by higher margin services from 1) the resumption of full operation of MYEG’s E-Services Centers nationwide, 2) higher contribution from the foreign worker job matching services and 3) contribution from the sale of Zetrix token, which pushed EBITDA margin at a record high of 66% (+6.3ppts QoQ, +8.3% ppts YoY).

• Key highlight. To recap, for every successful foreign worker job matching, MYEG will receive around RM1k. Meanwhile, for e-services, MYEG will receive around RM2-RM3 per transaction (depending on services).

• Against Estimates: Inline. MYEG’s 1H22 core profit grew by 9% YoY to RM170.5mn despite revenue that declined by 3% due to lower demand from the Covid-19 quarantine services. The decline in revenue for 1H22 was offset however by higher margin services from the resumption of E-Services Center nationwide, foreign worker job matching services, and sales of Zetrix token. Overall, MYEG’s 1H22 core profit was within our and consensus’ estimates accounting 47% and 49% of full year forecast respectively.

• Dividend. A 1st interim DPS of 0.25 sen was declared (2Q21: 0.25 sen), implying a payout ratio of 21%.

• Outlook. We are optimistic on MYEG’s near term business outlook following the full reopening of international borders, a boon for foreign worker segment. Besides, in the event of the re-introduction of the GST, we are confident that MYEG will be the front-runner for the GST monitoring system given its previous role as the provider of the system.

• Our Call. Reiterate a BUY call with a new TP of RM1.22 as we roll our valuation to FY23. We derive our TP based on a 25x PER (+1 SD to MYEG 5-year average PER) to FY23 EPS of 4.9 sen.

Source: BIMB Securities Research - 30 Aug 2022