KEY INVESTMENT HIGHLIGHTS

• Double digit growth in 5QFY19 normalised earnings to RM69.2m, an increase of +21.8%qoq

• Full year FY19 normalised earnings amounted to RM304.5m, which is slightly above ours and consensus expectations

• Higher revenue contribution across all businesses

• Regional expansion will gradually reduce reliance on locally generated income

• Maintain BUY with an unchanged TP of RM1.49

Slightly above expectation. MY E.G Services Bhd (MYEG) posted resilient 5QFY19 normalised earnings of RM69.2m, an increase of +21.8%qoq. This was mainly due to lower staff cost as well as lower advertising and marketing cost. Meanwhile, 5QFY19 revenue remained resilient at RM119.7m (+0.5%qoq). Cumulatively full year 15MFY19 normalised earnings amounted to RM304.5m. This was primarily attributable to:

i) concession related services such as Immigration and JPJ related ancillary services;

ii) commercial services such as motor vehicle trading related services, financing services, sale of tax monitoring system, foreign worker recruitment and placement related services; and

iii) contribution from Cardbiz Group.

All in, the group’s 15MFY19 financial performance came in slightly above ours and consensus expectations, accounting for 107.7% and 106.0% of FY19 earnings estimates.

Impact to earnings. We are maintaining our earnings estimates at this juncture.

Target price. We are maintaining our target price to RM1.49. This is premised on FY20 EPS of 7.1sen, pegged to unchanged forward PER of 21x. Our target PER is the group’s three year historical average.

Maintain BUY. We expect its local business to remain resilient, in view of the good track record of providing the online services. Moving forward, we expect the group’s earnings growth will stem from the group’s effort to replicate its offerings in the region. The effort has started to bear fruit as seen in its latest progress in Indonesia and the Philippines. We believe the move would also help to reduce the group’s reliance on the local market. Thus, we view that the recent fall in the group’s share price over the political turmoil is unjustified. On another note, MYEG business model remains attractive which garner healthy profit margin of about 50%. All factors considered, we are maintaining our BUY recommendation on the stock.

Source: MIDF Research - 28 Feb 2020