This article first appeared in The Edge Financial Daily on October 23, 2018

KUALA LUMPUR: The clarification that says My EG Services Bhd (MyEG) is currently not under investigation in relation to the charges against former deputy prime minister Datuk Seri Dr Ahmad Zahid Hamidi has helped stem the sharp fall in the company’s share price.

However, the same cannot be said of Datasonic Group Bhd, which was also named on the charge sheet against Ahmad Zahid, although the company has clarified that it and its directors did not make payments to Ahmad Zahid, who is also a former home minister.

MyEG’s share price soared 22.12%, or 25 sen, to close at RM1.38 yesterday after hitting an intraday high of RM1.41. The company recouped some RM990 million of its market value yesterday with a total market capitalisation of RM4.98 billion at the closing. The counter slipped 37 sen or 24.7% to close at a three-month low of RM1.13 last Friday.

“At its current price, the counter is not trading too far off from our target price of RM1.55, so it looks like the stock is trading near [its fundamentals],” said Martin Foo, analyst at MIDF Research.

Foo noted that the link between Mastoro Kenny IT Consultant and Services and MyEG still appears to be vague. However, he cautioned that margins could be impacted if the government decides to embark on cost-cutting measures by revising MyEG’s existing contract.

Mastoro, which is owned by an individual named M Kumaraguru a/l M Muthusamy, is alleged to have given Ahmad Zahid 24 cheques worth over RM13 million between July 15, 2016 and Feb 8, 2017 for it to secure contracts from MyEG.

Not all investors are positive about the stock, however. A fund manager who declined to be named said that news of involvement in corruption charges is generally negative, pointing out that there are concerns over the company’s prospects moving forward.

MyEG yesterday announced that it is teaming up with the University of Malaya to promote and develop blockchain research, as well as implement an e-wallet on its campus. The two parties signed a memorandum of understanding, which has a five-year tenure, yesterday.

Over at Datasonic, its share price continued to fall after a slight uptick in the morning yesterday. After declining 21 sen or 30% last Friday to a four-year low of 49 sen, the group’s shares slid three sen to close at 45.5 sen yesterday.

“The link between Datasonic and Ahmad Zahid’s case seems to be more direct, since their directors have been named in the charges,” MIDF’s Foo said.

The charge sheet stated that Datasonic deputy managing director Chew Ben Ben gave Ahmad Zahid two cheques worth RM6 million in total as bribe. The cheques were issued through Sarana Kencana Sdn Bhd, of which Datasonic managing director Datuk Abu Hanifah Noordin is a director and shareholder.