INVESTMENT HIGHLIGHTS

• 1HFY18 earnings improved by +26.9%yoy to RM111.8m
• Higher contribution across all business segments
• First interim dividend capped at 0.5sen despite better 1HFY18 earnings performance
• Expecting higher take up rate for the foreign worker job matching and placement programme in FY19
• Maintain NEUTRAL with a revised target price of RM2.47

Double digit growth in revenue. MY E.G. Services Berhad (MYEG) reported 2QFY18 earnings of RM59.0m. This translates into an increase of +24.0%yoy. The improvement in earnings was mainly attributable to:

i) higher transaction volumes from the online renewal of foreign workers’ permits (FWP), foreign workers rehiring programme services (FWR services) and foreign workers insurance from both FWP as well as FWR services;

ii) introduction of the foreign worker job matching and placement programme and;

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

Within expectation. Cumulatively, the group’s 1HFY18 earnings improved by +26.9%yoy to RM111.8m, in-tandem with the +23.9%yoy rise in 1HFY18 revenue. This accounts for 43% and 42% of ours and consensus full year FY18 earnings estimates respectively. Nonetheless, the 1HFY18 results came in within ours and consensus expectations. We expect a stronger 2HFY18 earnings performance, premised on higher contribution from the foreign worker job matching and placement programme. To recall the, the job matching and placement programme commenced in 2QFY18.

Dividend. MYEG announced first interim dividend of 0.5sen per share in 2QFY18. This is in-tandem with the previous year corresponding quarter. Note that the payout ratio has reduced to 31.3% in 2QFY18 as compared to 38.5% recorded in 2QFY17.

Impact. We made no changes to our FY18 earnings estimates. However, we revise upwards FY19 earnings to RM338.8m as we are assuming higher number of foreign workers from the job matching and placement programme.

Source: MIDF Research - 28 Feb 2018