With the country’s Covid-19 national immunisation programme close to three months in, government e-services provider MY. E.G. Services (MYEG) was awarded a contract by MIMOS to provide service desk and related services for a vaccine traceability system. Macquarie Equities Research (MQ Research) is positive on this development as there is potential for value-added-services beyond the existing scope and maintains Outperform on MYEG.

Playing a role in vaccine traceability system

• MYEG was awarded a contract by MIMOS to provide service desk and related services for a vaccine traceability system, of which the contract value is estimated to be ~RM625k for 2 years (1+1 contract). From MQ Research’s understanding, the contract is not to provide the end-to-end element of vaccine database development but some elements of it, particularly related to digital travel health certificates. This would then need to be integrated with other countries to enable mutual recognition and verification of vaccination and test records. While the monetisation strategy for the travel pass is uncertain given constant evolvement of the situation as it requires international consensus, MQ Research is still positive on this development as MQ Research believes there will be potential for value-added-services beyond the existing scope, which will be the building block for MYEG to potentially secure the vaccine passport project, given the synergies.

Bodes well for MYEG’s plans to play a role in vaccine passports

• Who is involved? The Science, Technology and Innovation Ministry (MOSTI) and MIMOS Bhd (Malaysia’s Applied Research and Development Centre) with the assistance of Health Ministry have begun a vaccine tracing project utilising blockchain technology as a proof-of-concept stage in early March. Tracing will be done from the manufacturer at a product identification level until the supply chain and to the doctor who dispenses it and individual receiving it. The vaccine traceability system can be used to prepare for a Digital Health Certificate that meets international standards. From MQ Research’s understanding, the list of vaccines for Covid-19 would be submitted by MOSTI. As MIMOS is the agency responsible for the vaccine database management and digital health certificate systems, MQ Research believes any private players eyeing to tap onto the potential of providing vaccine passport will have to collaborate with MIMOS or MOSTI directly.
• Impact to MYEG. Recall, MYEG has expressed interest to provide vaccine passports software for inbound and outbound travellers as an additional service after collaborating with the Health Ministry to exclusively provide MySafeTravel Pass portal for travellers. Other players eyeing for the project include Datasonic Group Bhd (DSON KLS, Not Rated), the existing Malaysian passport provider and Iris Corporation Berhad (ICB MK, Not Rated), the recipient of the recent RM1.2bn National Integrated Immigration System. However, MQ Research’s channel checks among industry players revealed that no tender or request for information has been called so far. MYEG believes given the urgency of the situation, the project will be via a direct award instead of an open tender process. This development bodes well for MYEG given the company’s aspiration for its healthcare division, which MQ Research estimates will make up ~20% of its FY21E revenue.

Action and Recommendation

• Maintain Outperform recommendation on MYEG. As an incumbent e-government service provider with strong retention moat, MYEG’s target price (TP) of RM2.42 (bull case valuation RM3.39) implies 22E 26x price-earnings ratio (PER), close to its 5-year average price-earnings (PE) of 27x. Sentiment overhang shall not be an issue anymore as MYEG has secured extension for most of its services.

12-month Target Price Methodology

• MYEG MK: RM2.42 based on a discounted cash flow (DCF) methodology

Source: Macquarie Research - 10 May 2021