Valuation / Recommendation

Results were within expectations, achieving 103.1% and 103.4% of our full year revenue and profit forecasts for FY21, driven by increased contributions from concession services, such as the (1) online renewal of (MIRT) and (CDL), (2) commercial services such as Covid-19 health screening and quarantine collection services (MySafeTravel and MySafeQ).

We maintain a BUY recommendation on MY E.G. Services Berhad over a TP of RM1.11 based on its FY23F EPS of 5.0 sen and PE of 22.1x, in line with the 2-year average.

Investment Highlights

Overall online transaction volumes increased for existing concession and commercial services due to more users opting to transact online amid the Covid-19 pandemic. Contributions from its road transport business increased due to higher online transactions overall for all services, contributing approximately 25-30% to FY21 revenue. At the end of 2021, the company commenced the pilot for automated driver testing which is expected to go live and be commercialised in April 2022.

We think that contributions from its new concession and commercial services will increase moving forward amid waning impact from the Covid-19 pandemic. Lower Covid-19 local cases will attract more inbound travel into Malaysia, driving demand for the company’s traveller testing and quarantine services, offsetting lower local demand for hotel quarantine services. Assuming no repeat lockdowns, we expect travel-related testing, quarantine, and vaccine verification services to be the main drivers in the coming quarter.

Risk factor. Unexpected termination of concession contracts which may affect earnings visibility moving forward.

Source: Mercury Research - 28 Feb 2022