My E.G Services (MYEG) kicked off its 1Q23 financial performance strongly after core profit jumped by 41% QoQ and 29% YoY to RM105.7mn despite only a slight increase in revenue (+5% QoQ, +7% YoY) driven by MYEG’s high-margin business across its services. EBITDA margin expanded by 15.4 ppts QoQ and 13.6 ppts YoY to 73.5% in 1Q23. Overall, MYEG’s 1Q23 was in line with our and consensus estimate, accounting 26% and 27% of the full year forecast, respectively. We remain optimistic on MYEG business prospects driven by the reopening of international borders, a catalyst for its immigration-related services. Furthermore, MYEG's ventures into the blockchain technology offer a promising opportunity to mitigate potential declines and risks in government concession/commercial-concession-related services in the future. Maintain a BUY call on MYEG with TP of RM1.15, pegged at 21x PER to 2023F EPS of 5.5 sen.

• Against estimate: Inline. MYEG 1Q23 core profit of RM105.7mn was in line with our and consensus estimate, accounting 26% and 27% of the full year forecast, respectively.

• Dividend. No dividend declared during the quarter. Nonetheless, we anticipate MYEG to declare a DPS of 1.7 sen in 2023F, implying a 30% payout.

• QoQ/YoY. 1Q23 revenue grew slightly by 5% QoQ and 7% YoY driven by 1) higher contribution from MYEG’s existing services following the country’s full economic reopening, 2) a one-off recognition of fair value gain subsequent to MYEG’s investment in Agmo Holdings Berhad (Agmo), 3) higher contribution from newly launch services from Zetrix blockchain platform including the sale of Zetrix tokens, and 4) an increase in contribution from foreign worker job matching. Thanks to MYEG’s overall higher margin services, EBITDA margin expanded by 15.4 ppts QoQ and 13.6% YoY, reaching to 73.5% in 1Q23. This resulted in core profit to jump by 41% QoQ and 29% YoY to RM105.7mn.

• Outlook. We remain optimistic on MYEG business prospects driven by the reopening of international borders, a catalyst for its immigrationrelated services. Besides, we foresee a bright prospect for MYEG’s ventures into the blockchain technology which would be able to offset any decline or downside risks from any possible moderation contribution within the government’s concession/ commercial concession-related services in the future.

• Our call. Maintain a BUY call on MYEG with TP of RM1.15, pegged at 21x PER to 2023F EPS of 5.5 sen.

Source: BIMB Securities Research - 31 May 2023