KEY INVESTMENT HIGHLIGHTS

• 2QFY20 normalised earnings came in +8.3%yoy higher at RM63.0m, supported by all its business segments

• Cumulative 1HFY20 financial performance came in within ours and consensus expectations

• Timely introduction of new services to cater for the Covid-19 pandemic

• Stable profit margin of approximately 50%

• Remains one of the front runners for the NIIS project

• Maintain BUY with a revised TP of RM1.58

In-line with expectation. MY E.G Services Bhd’s (MYEG) 2QFY20 normalised earnings came in at RM63.0m, an increase of +8.3%yoy. This was mainly 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 iii) introduction of new services such as Covid-19 health screening as well as online sale of groceries thorough its “Nak Beli” online store; and iv) contribution from Cardbiz Group. Cumulatively, the group’s 1HFY20 financial performance of RM121.9m came in within ours and consensus expectations, accounting for 47.3% and 44.4% of full year FY20 earnings estimates respectively.

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

Target price. We are maintaining our target price of RM1.58. This is premised on FY21 EPS of 7.5sen, pegged to unchanged forward PER of 21x. Our target PER is the group’s three year historical average.

Maintain BUY. We expect the 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. On another note, MYEG business model remains attractive which garner healthy profit margin of about 50%. In the immediate term, there would further upside should the group able to secure the National Integrated Immigration System (NIIS) project. All factors considered, we are maintaining our BUY recommendation on the stock

Source: MIDF Research - 28 Aug 2020