• MY E.G. Services Berhad (MYEG) received a letter of acceptance (LoA) from Penang Development Corporation (PDC) on 12th Apr  2023 to set up a workers’ village at Batu Kawan Industrial Park.  The construction of the workers village will take around 18 months  to complete and can accommodate up to 7,500 workers at one  time.

• The accommodation will be dorm-style with estimated capex of RM12k/bed. MYEG intends to implement a monthly rental fee of  RM200 per bed and aims to achieve an occupancy rate exceeding  80% during the initial phase.

• We are positive on this announcement and hence, no changed to  earnings estimates as it is still in the early stage of development.

• Reiterate our BUY call on MYEG at a lower TP of RM1.15 (from  RM1.22), pegged at 21x PER to 2023 EPS of 5.5 sen.

MYEG to Set Up a Workers Village at Batu Kawan 

MY E.G. Services Berhad (MYEG) announced that it had received a  letter of acceptance (LoA) from Penang Development Corporation  (PDC) on 12th Apr 2023 to set up a workers’ village (accommodation  facilities) at Batu Kawan Industrial Park (BKIP 3), Mukim 14, Bukit  Tambun, Seberang Perai Selatan, Pulau Penang, which can  accommodate around 7,500 foreign workers at one time. The workers’  village will be constructed at MYEG’s leasing land measuring 8.39 acres  at a value of RM20.4mn for a 30 years period. MYEG will build,  manage, and operate the workers’ village and related facilities at its  own cost. In addition, the workers village is required to comply with  Department of Labour Peninsular Malaysia and certified with Green  Rating for Integrated Habitat Assessment – Real Estate (GreenRE).

Capex of RM12k/bed

Based on the information we gathered, the accommodation will adopt  a dormitory-style arrangement and the CAPEX is projected to be  RM12k/bed, resulting in a total capex of RM90mn. The construction of  the workers village is expected to take around 18 months to be  completed. Note that, MYEG aims to achieve an occupancy rate  exceeding 80% (translating over 6,000 beds) during the initial stage.  MYEG also guided that it will charge RM200/bed/month. Upon  completion of the workers' village, MYEG is anticipated to generate  approximately RM14.4mn annually at 80% occupancy and RM18mn at  full occupancy through rental fees.

We believe MYEG’s target of 80% occupancy rate during the initial  stage is achievable as the company guided that it has received positive  feedbacks and commitment from employers regarding the  development of the workers village following the high standards of  requirements set by the authorities to protect the rights of the  workers.

Source: BIMB Securities Research - 13 Apr 2023