AFTER having been in the doldrums since the aftermath of the 14th General Election in May 2018, My EG.Services Bhd seems to be showing viable signs of being back on track.
UOB Kay Hian Research today expressed optimism that things are beginning to look up for the Malaysian government e-service provider following its provision of COVID-19 testing and quarantine-related services for inbound travellers.
For the record, MyEG recently collaborated with the Health Ministry to launch an online payment system for the compulsory COVID-19 swab tests at all immigration points. The project has a tenure of two years from Nov 20 this year.
“We project MyEG’s profits from this project – primarily from swab tests – to reach RM130 mil in 2021,” wrote the research house’s head Vincent Khoo in a company update.
UOB Kay Hian Research foresees this e-payment concession for inbound travellers as a direct proxy to what is described as “borders reopening play”.
“We understand from the management that this online payment system is a component in its proposed e-visa (Visa Luar Negara or VLN) project that was launched in early-2020,” explained Khoo.
“This system can be used to deploy VLN services when borders reopen. MYEG is now the proxy to a passenger traffic recovery, and will continue to benefit from the re-opening of borders, travel bubbles and a recovery in the tourism industry.”
Moreover, the VLN project will make up for lower proceeds from immigration-related services given border closure has clearly impacted MyEG’s foreign worker-related business which commands about 50% of its FY2019 total revenue
“We understand that the volume of online foreign worker renewal through MYEG has softened by 8% year-to-date based on immigration portal’s data, while the job matching services for foreign workers (revenue contribution of about RM5 mil/month in FY2019) has been significantly affected,” noted Khoo.
In UOB Kay Hian Research’s observation, below are some potential catalysts for MyEG:
- The recovery in inbound passenger traffic which will lift MyEG’s traveller pass system’s earnings;
- The loosening of border controls to allow foreign worker intake which will benefit MyEG’s foreign worker matching services;
- The awarding of the RM1 bil-RM1.5 bil National Integrated Immigration System (NIIS) contract which would at the very least benefit MyEG’s investee, S5 Holdings Inc;
- Other longer-term opportunities relating to the revival of foreign worker accommodation projects, potentially some form of amnesty programmes to address the huge illegal foreign worker community; and
- The potential revival of the goods and services tax (GST) system.
All-in, the research house maintained its “buy” rating on MyEG with a higher target price of RM2.12 (from RM1.50 previously).
“There will be further upside to our target price should MyEG clinch the NIIS contract,” it added.
At 12 noon, MyEG was up one sen or 0.74% at RM1.37 with 2.89 million shares traded, thus giving the company a market capitalisation of RM4.94 bil. – Oct 30, 2020
