MY E.GServices - More goodies in the pipeline
Date:
2013-09-20
Firm:
CIMB
Stock:
Price Target:
2.46
Price Call:
BUY
Last Price:
0.90
Upside/Downside:
+1.56 (173.33%)
Target RM2.46 (Long Term: Out Perform)
There were a few positive surprises at MyEG's recent meeting with some local funds. Its outlook remains promising with VVTS and FWPR services driving its EPS growth in the next 1-2 years. Its CSTM project is on schedule to start early next year. We maintain our EPS and target price at 19.1x CY15 P/E, a 20% premium over our 15.9x index target. MyEG remains an Outperform, potentially catalysed by the successful implementation of its CSTM project and the launch of new services.
We maintain our EPS and target price at 19.1x CY15 P/E, a 20% premium over our 15.9x index target. MyEG remains an Outperform, potentially catalysed by the successful implementation of its CSTM project and the launch of new services.
What Happened
We recently organised a lunch meeting for 15 local fund managers to meet MyEG's Managing Director, Mr TS Wong. There were a few positive surprises: i) in the pipeline are plans to offer new services for the immigration division and applications for new foreign workers; ii) there could be changes in the government's policy which could raise demand for its online voluntary vehicle transfer service (VVTS); and iii) a potentially larger customer base for its custom service tax monitoring system (CSTM), to include the retail sector if GST is implemented. The government could announce plans to implement GST at the coming 2014 Budget next month.
What We Think
We are bullish on MyEG's EPS growth over the next 2-3 years, to be led by new services like VVTS and foreign workers' annual working permit renewal (FWPR). Its longer-term outlook would depend on the success of its CSTM concession, we believe. Its current ¡°click-and-pay¡± business is getting competitive as more players move into this market. As such, management is looking to offer more sophisticated services like machine-to-machine (M2M) businesses. The CSTM project is an example. Another potential M2M project the company is working on is road safety diagnostic services (RSDS). We understand MyEG is currently in preliminary negotiations with the government for this project.
What You Should Do
Investors should continue to accumulate this stock. Its outlook is exciting with potential new projects in the pipeline. We have not assumed any earnings from CSTM and RSDS. Based on existing services alone, our 3-year EPS CAGR for MyEG is a strong 32.2%. In addition, its business model is defensive with recurring income.
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psd57
1.At current price, PE is 41.21x FYE June 2013 earnings! it is high
2.Assumption: Based on a reasonable PE of 20x; EPS CAGR of *20%p.a over the next 3 yrs till 2016. (EPS 2013 5.80c)
Result: I only see a price of Rm 2.00 based on FYE 2016 estimated earnings
Note: *I am compounding EPS 2013 of 5.80c by '20%' p.a for 3 years in view of all the goodies outlined above. I think it is reasonable
As it stand now, they r basically 'fronloading' many years of potential growth into the current price. This is essentially stealing the future earnings from potential shareholders/newbies. Nevertheless, it is an atttactive stock at a fairly reasonable price mentioned above. Give others also a chance mah!
09/11/2013 13:12
2013-11-09 13:41