INVESTMENT HIGHLIGHTS

• 1QFY19 earnings amounted to RM58.7m, supported by income from concession-related and commercial services

• Profit margin remains healthy at above 50%.

• All in, the 1QFY19 financial performance is in-line with ours and consensus expectations

• Oversea ventures will enable the group to organically grew its earnings

• Maintain BUY with a revised target price of RM1.60

Solid profit margin. MY E.G. Services Berhad (MYEG) posted 1QFY19 earnings of RM58.7m. This was mainly arising from:

i) concession related services such as Immigration and JP related and ancillary series;

ii) commercial services such as motor vehicle trading related services, financing services, sale of tax monitoring system as well as contribution from Cardbiz Group.

Note that MYEG’s profit margin remains healthy above 50%. All in, the group’s 1QFY19 financial performance came in within ours and consensus estimates, accounting for 22.2% and 20.1% respectively of full year earnings estimates.

Target Price. We are rolling forward our valuation based year to FY20 and derive a new target price of RM1.60 (previously RM1.55). This is premised on FY20 EPS of 7.6sen per share, pegged to unchanged forward PER of 21x. Our target price is one standard deviation below its three year historical average.

Maintain BUY. MYEG has an attractive business model which reaps healthy profit margins of more than 50%. Management will continue to roll out new e-government services whilst maintaining the current service levels. Meanwhile, we remain positive on the group’s strategy of monetising its expertise the region. This includes the Republic of the Philippines, People’s Republic of Bangladesh and the Republic of Indonesia. This would enable to the group to continue to grow its earnings organically. Taking into consideration all the above-mentioned factors, we are maintaining our BUY recommendation on the stock.

Source: MIDF Research - 27 Feb 2019