KUALA LUMPUR (Feb 9): Affin Hwang Capital Research expects My EG Services Bhd's (MyEG) valuation to rerate within the next 12 months, led by strong earnings growth, easing concerns over termination of its concessions, exciting new business prospects and high market liquidity.

Its analyst Isaac Chow initiated a "buy" call on MyEG with a target price of RM2.70, as he likes MyEG for its proactive management, good working relation with government agencies, strong 2021 earnings outlook and exciting new business opportunities.

As MyEG launched a vast array of new products and services in 2020, he also expects some services such as Covid-19 screening, MySafeTravel, online grocery, renewal of motorcycle road tax to contribute materially to the group's 2021 revenue.

"Importantly, we are positive on MyEG's earnings outlook, expecting 18% year-on-year growth in 2021 core net profit driven by full-year contribution from the new services launched in 2020 and higher adoption of online services for its road transport segment due to the behavioural changes brought forth by the Covid-19 pandemic," he said in a report today.

Looking into 2022, he anticipates a rebound in the group's immigration-related services after the easing of lockdowns should more than offset waning Covid-19 testing revenue.

Chow expects MyEG's valuation to rerate strongly, driven by a strong pickup in quarterly core net profit.

"Its extension of road transport and immigration concessions in 2020 reaffirmed our view that MyEG offers good services and has healthy working relations with government agencies," he said, adding that MyEG is also working on exciting new projects including Zhifei's Covid-19 vaccine and digital banking services.

"Elsewhere, the potential reimplementation of the GST may fuel investor interest in MyEG, given the group's extensive experience in the GST monitoring-related project," he said.

At 12.05pm, MyEG rose eight sen or 4% to RM2.08, valuing the group at RM7.38 billion.