CIMB Research maintains Outperform on MyEG, target price RM2.46

Published: Friday September 20, 2013 MYT 8:23:00 AM 

Updated: Friday September 20, 2013 MYT 8:26:37 AM

KUALA LUMPUR: CIMB Equities Research is maintaining its Outperform recommendation on My E.G. Services with an unchanged target price of RM2.46.

It said on Friday it maintained its EPS and target price at 19.1 times CY15 price-to-earnings (P/E), a 20% premium over its 15.9 times index target.

“MyEG remains an Outperform, potentially catalysed by the successful implementation of its custom service tax monitoring system (CSTM) project and the launch of new services,” it said.

CIMB Research said MyEG plans to offer new services for the immigration division and applications for new foreign workers; ii) there could be changes in the government’s policy which could raise demand for its online voluntary vehicle transfer service (VVTS); and iii) a potentially larger customer base for its CSTM, to include the retail sector if GST is implemented,” it said.

The government could announce plans to implement GST at the coming 2014 Budget next month.

“We are bullish on MyEG’s EPS growth over the next two to three years, to be led by new services like VVTS and foreign workers’ annual working permit renewal (FWPR).

“Its longer-term outlook would depend on the success of its CSTM concession, we believe. Its current ‘click-and-pay’ business is getting competitive as more players move into this market.

“As such, management is looking to offer more sophisticated services like machine-to-machine (M2M) businesses,” it said. The CSTM project is an example.

Another potential M2M project the company is working on is road safety diagnostic services (RSDS).

CIMB Research understands that MyEG is currently in preliminary negotiations with the government for this project.

“Investors should continue to accumulate this stock. Its outlook is exciting with potential new projects in the pipeline.

“We have not assumed any earnings from CSTM and RSDS. Based on existing services alone, our three-year EPS CAGR for MyEG is a strong 32.2%. In addition, its business model is defensive with recurring income,” it said.