MY E.G. Services Bhd (MyEG) has joined the chorus of companies that suddenly get the calling on the need to provide their workforce with proper – and healthy – accommodation especially amid the COVID-19 pandemic rout.
But probably short-handed in terms of funding, the e-government service provider has to resort to private placement of up to 220 million new shares – which represent up to about 6.29% of the total number of issued its shares (excluding treasury shares) – to realise such initiative.
The proceed from the placement will be used to fund the development of hostels for foreign workers under an ongoing project, develop healthcare-related services in addition to buying fixed assets like kiosks for the online renewal of car and motorcycle road tax under its e-government concession business.
MIDF Research views the fund-raising exercise positively as this would ensure that the foreign workers have better living condition.
To recap, the Human Resources Ministry has revealed that about 91.1% or 1.4 million foreign workers in Malaysia are not provided with accommodation that complies with provisions in the Workers’ Minimum Standards of Housing and Amenities Act 1990 (Act 446).
“Meanwhile, the development of healthcare-related services and purchase of fixed assets for its e-government concession business would also take advantage of the COVID-19 pandemic,” opined analyst Martin Foo Chuan Loong
Elaborating on the share placement exercise, MIDF Research noted that this is a better funding channel after considering MyEG’s net cash position of RM102.4 mil as of 3Q FY2020.
“Should MyEG raised the required fund through bank borrowings, it would be left in a net debt position,” justified Foo.
“Thus, we view that the proposed placement represents a better avenue to raise the required funding for expansion.”
Moreover, given MyEG has completed the first tranche of its proposed placement (involving 120 million new MyEG shares or 3.43% of its total shares), the group would not face any issue to place out additional shares as and when such need arises.
All-in, MIDF Research maintained its “neutral” rating on MyEG but raised its target price to RM2 (from RM1.58 previously). – Dec 10, 2020
