• We anticipate MyEG’s net profit to grow at a 3-year CAGR of 12% over FY23-26F, driven by stronger Zetrix token sales and greater contributions from services offered through the blockchain platform.

• We expect the blockchain segment to constitute around 40% - 50% of MyEG’s topline by 2026/27, with Ztrade now going live. According to management, each Certificate of Origin (CO) issued to facilitate shipments to China via Ztrade will generate approximately RMB200 (circa RM130).

• Maintain a BUY rating on MyEG with an unchanged target price of RM1.21, implying a PER of 16x (average of 5-year historical forward PER) on FY24F EPS of 7.6 sen.

Remarkable 2023 with Zetrix IEO

MyEG Services Berhad (MyEG)’s enterprise Layer 1 blockchain, Zetrix, has successfully launched its Initial Exchange Offering (IEO) on multiple cryptocurrency exchanges (Coinstore, MEXC and BitForex) back in October 2023. This achievement does not only highlight MyEG's innovative edge in blockchain technology but also creates new revenue streams and enhances its digital ecosystem. Since its listing, the price of Zetrix tokens has surged by more than threefold, reaching USD17 recently, up from the initial IEO price of USD5 (refer to Chart 1). This positive trend reflects strong market confidence, and we view the demand for Zetrix token to remain resilient as more services being offered through the blockchain platform.

The Potential of Ztrade

As of 1QFY24, the blockchain segment (i.e. Zcert, Zidentity, and NFT Pangolin) has already contributed circa 20% - 30% of MyEG’s revenue. We project MyEG’s net profit to grow at a 3-year CAGR of 12% over FY23- FY26F, driven by stronger Zetrix token sales and greater contributions from services rendered via the blockchain platform. We expect this segment to account for around 40% - 50% of MyEG’s topline by 2026/27, fueled by Ztrade, MyEG’s newly launched cross-border trade facilitation service. According to management, Ztrade has the potential to generate significant earnings through a fixed submission fee of RMB200 (circa RM130), for each Certificate of Origin (CO) issued to facilitate shipments to China. With Asian countries like Malaysia, the Philippines and Indonesia being major trading partners with China, Ztrade presents a lucrative opportunity to drive revenue growth via substantial transshipments volumes.

Maintain BUY on MyEG with TP of RM1.21

Reiterate our BUY call on MyEG with a target price of RM1.21. This implies a PER of 16x (average of 5-year historical forward PER) on FY24F EPS of 7.6 sen. Given government’s ongoing digitization efforts and increase in adoption of digital services globally, we believe that MyEG is well-placed to capture a larger market share, making it a compelling top pick for investors seeking long-term growth and stability.

Source: BIMB Securities Research - 17 Jul 2024