MyEG Services Bhd
(June 22, RM2.62)
Maintain add with an unchanged target price of RM3.54: Last Thursday, MyEG launched its new automotive portal www.mymotor.my (MyMotor). MyMotor will offer an integrated transactional online solution to vehicle ownership, something different from the current traditional automotive online classifieds market. Through a wider buyer and seller network, MyMotor can search for the best deals for both parties. In addition, MyEG will ensure cars listed for sale are verified and provide a comprehensive one-stop solution for all transactions. MyMotor also provides a free listing service for car sellers from last Thursday. Buyers and sellers can use MyMotor for free and only pay a commission when the sale is completed, believed to be 2% to 5%, depending on the vehicle.

The launch of MyMotor was a positive surprise to us as this could be another moneymaker for the company. The company’s strength is its ability to add commercial services that layer on top of government services, such as selling compulsory foreign workers insurance within the foreign worker permit renewal service. The annual size for the used and new car market is around RM40 billion and management revealed during our discussions that in three years, the company is targeting 10% market share or RM4 billion transactions through MyMotor. Assuming 2% commission charges, potential annual revenue could be RM80 million; assuming 40% to 50% net profit margin, potential annual profit from MyMotor is RM32 million to RM40 million. This does not include potential earnings from selling through MyEG car insurance online, road tax renewals and customers using its current voluntary online vehicle transfer services. However, it is still too early to assume any earnings potential from MyMotor.

Remain invested in the stock, with the customs service tax monitoring project launch as its next major catalyst in September. Given time, MyMotor could be another major income earner for the company. — CIMB Research, June 19

This article first appeared in The Edge Financial Daily, on June 23, 2015.