KUALA LUMPUR (Sept 3): CIMB IB Research has maintained its “Add” rating on MY E.G. Services Bhd (MYEG) with a higher target price of RM1.72 (from RM1.47) to better reflect on the technology sector’s 2019 target price-to-earnings (P/E) of 15 times.
In a note today, the research house said the higher premium is to reflect the potential new services which the company can secure over the next few months.
“Re-rating catalysts include securing the SST contract and the new module for foreign workers,” the research house said.
MYEG has submitted a proposal for a new module related to foreign workers and indicates this could be a major revenue generator for the company, if it’s bid is successful, the note added.
CIMB IB also pointed out that the company’s previous GST Monitoring (GSTM) system could still be used to track the collection of sales and service tax (SST) in real time.
The research house expects the new government to decide on whether or not to use the system provided by MYEG in next few months.
On the joint ventures (JV) business in the Philippines, CIMB IB said the operation has achieved the break-even milestone this year and expects this could also be a major revenue stream over the next few years for MYEG.
MYEG set up its 40%-owned Philippine JV, I-Pay Commerce Ventures (IPCV), in March 2017 to provide e-government services. This JV provides e-government services for the police, Labour Department and some cities in the Philippines.
In less than two years, the Philippines JV is handling approximately 20,000 transactions daily.
The research house also expects the joint-venture in the Philippines to expand its territory by launching e-government services in Bangladesh by year-end.
CIMB IB raised MYEG earnings per share (EPS) for financial year 2018 (FY18) forward, to reflect the 15-month financial year, since MYEG had changed its financial year from June to September.
For MYEG's 12-month results in FY18, CIMB said net profit was in line with its consensus and expectations.
At 11.06am, MYEG share price traded unchanged at RM1.49, with 17 million shares done, bringing a market capitalisation of RM5.41 billion.