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Tuesday, April 15, 2014

MyEG Services falls to lowest since November

Published: Monday April 14, 2014 MYT 11:41:00 AM 
Updated: Monday April 14, 2014 MYT 11:44:11 AM

KUALA LUMPUR: Shares of My EG Services fell to RM2.42 on Monday, the lowest since November 2013 as investors await more news following a recent clarification by the Customs Department over the Goods and Services Tax (GST).

At 11.24am, My EG was down 19 sen to RM2.42. There were 2.84 million shares done.

The FBM KLCI fell 0.41 point to 1,852.25. Turnover was 832.03 million shares valued at RM573.49mil. There were 299 gainers, 333 losers and 316 counters unchanged.

A news report, quoting the Customs director general Datuk Seri Khazali Ahmad as saying the government did not elect MyEG to collect the GST on behalf of the government.

Khazali was reported to have stated MyEG would only receive remuneration only if the implementation of the new system generated a year-on-year improvement in tax contribution of more than 14% from select sectors.

On March 25, CIMB Equities Research said MyEG's Customs Service Tax Monitoring system (CSTM) project, was expected to start nationwide from April 2014 onwards. Phase 1 of this project involves linking up around 20,000 point-of-sales (POS) terminals at restaurants and entertainment outlets across the whole country to monitor service tax transactions electronically.

The research house said CSTM should help reduce leakages and improve the government's service tax revenue collection. The CSTM system will move from the current service tax of 6% to the GST on April 1, 2015. The GST will also be set at 6% initially. CSTM is already GST compliance.

"In 2014, the government is expected to collect around RM850mil service tax under CSTM's Phase 1. Taking into account the country's long-term inflation and economic growth, the base case for the service tax is set at a 10% annual growth over the next six years.

"MyEG will only get compensated if the service tax collection is above the revenue base case scenario. The company will effectively get 20% of any increase in service tax collected above the base case (not including opex and depreciation). However, the company gets nothing if the service tax collection is below the base-case scenario.

"Our sensitivity analysis shows MyEG should break even if CSTM's revenue is 10% above the revenue base-case. We have assumed for MyEG, CSTM's revenue base is 20% above the base-case scenario. This should help contribute RM18mil to RM20mil in net profit to MyEG in FY15/16," said CIMB Research.

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