• 1HFY17 earnings surged by +49.9%yoy to RM88.1m, supported by +39.6%yoy growth in revenue

• As expected, transaction volume across its various business segments continued to grow

• Anticipating additional earnings stream from the custom tax projects in 2HFY17

• Maintain BUY with an unchanged target price of RM1.89 per share

Strong 1HFY17 performance. MY E.G. Services Berhad (MYEG) 2QFY17 earnings came in at RM47.6m, which translates into an impressive earnings growth of +57.1%yoy. This lifted the group’s 1HFY17 earnings by +49.9%yoy to RM88.1m. The increase in earnings was mainly attributable to:

i) Higher transaction volumes from the online renewal of foreign workers’ permits and insurance (FWP) and foreign worker rehiring programme services,

ii) Increase in revenue contribution from JPJ relate services, and

iii) Increase in revenue contribution from motor vehicle trading related services.

Within expectations. All in, MYEG’s 1HFY17 earnings came in at 44.4% of ours and 45.1% of consensus’ full year FY17 earnings estimates respectively. Apart from the continued growth in volume of MYEG’s existing services, we are expecting stronger 2HFY17 financial performance due to additional income stream from the Customs tax projects.

Target Price. We maintain our target price of RM1.89 per share. This is premised on FY18 EPS of 7.2sen per share pegged to FY18 forward PER of 26.3x. Our target price is based on its 3-year historical low PER.

Maintain BUY. MYEG has an attractive business model and strong cashrich balance sheet. As at 2QFY17, it has a net cash position of RM94.4m. It is also enjoying an appealing profit margin of more than 50%. The upcoming implemention of the Customs tax projects would also reaffirm the group’s revenue and earnings growth trajectory. All factors considered, we maintain our BUY recommendation on MYEG.

Source: MIDF Research - 28 Feb 2017