MYEG (0138) : MY E.G. Services - Foreign worker renewal service gets a major boost
Target RM7.80 (Stock Rating: ADD)
It was a positive surprise to hear that MyEG was appointed by the government to compile and maintain database on the country’s foreign workers (both legal and illegal) during our Corporate Day. The database will come from employers of foreign workers that must use MyEG’s online foreign workers work permit renewal services (FWPR) from 2015 onwards. We bump up our EPS forecasts by 38-63% to reflect higher earnings mainly from the FWPR. This raises our target price, which remains pegged to its peers’ 21x CY16 P/E. Successful launch of the CSTM project and the new developments in the FWPR are potential re-rating catalysts for the stock.
What Happened
MyEG participated in our Malaysia Corporate Day conference yesterday, where management met up with around 40 fund managers (in small group meetings). The meetings revealed both a positive and a negative surprise. The positive was MyEG’s appointment by the government to work with the Immigration Department to compile and maintain the database on the country’s legal and illegal foreign workers. Starting this year, it is compulsory for all employers of foreign workers to use MyEG’s FWPR. This would help the company to continuously update and maintain the database. Our earlier forecast was only 15-20% market share for MyEG’s FWPR in FY15-16. The negative surprise was the later start of end-Feb 2015 for nationwide operation of Phase 1 of the CSTM project. We were earlier looking for CSTM to start in early Jan-2015.
What We Think
The new development for MyEG’s FWPR was a major positive surprise for us. FWPR is now the Group’s largest revenue contributor until CSTM Phase 2 kicks in. However, we are slightly disappointed by the slight delay in the CSTM service. But the impact should be offset by expected higher FWPR earnings from 2015 onwards.
What You Should Do
Remain invested in the stock. With earnings kicking in from the CSTM and FWPR, we forecast a strong 3-year EPS CAGR of 71%. MyEG’s current valuation of 11.7x 2016 P/E looks attractive and this does not include potential earnings from the proposed road safety diagnostic kit project (RSDS). We also note that the stock will go ex of its 1:1 bonus issue on 8 Jan (this Thursday).
Source: CIMB Daybreak - 07 January 2015
Target RM7.80 (Stock Rating: ADD)
It was a positive surprise to hear that MyEG was appointed by the government to compile and maintain database on the country’s foreign workers (both legal and illegal) during our Corporate Day. The database will come from employers of foreign workers that must use MyEG’s online foreign workers work permit renewal services (FWPR) from 2015 onwards. We bump up our EPS forecasts by 38-63% to reflect higher earnings mainly from the FWPR. This raises our target price, which remains pegged to its peers’ 21x CY16 P/E. Successful launch of the CSTM project and the new developments in the FWPR are potential re-rating catalysts for the stock.
What Happened
MyEG participated in our Malaysia Corporate Day conference yesterday, where management met up with around 40 fund managers (in small group meetings). The meetings revealed both a positive and a negative surprise. The positive was MyEG’s appointment by the government to work with the Immigration Department to compile and maintain the database on the country’s legal and illegal foreign workers. Starting this year, it is compulsory for all employers of foreign workers to use MyEG’s FWPR. This would help the company to continuously update and maintain the database. Our earlier forecast was only 15-20% market share for MyEG’s FWPR in FY15-16. The negative surprise was the later start of end-Feb 2015 for nationwide operation of Phase 1 of the CSTM project. We were earlier looking for CSTM to start in early Jan-2015.
What We Think
The new development for MyEG’s FWPR was a major positive surprise for us. FWPR is now the Group’s largest revenue contributor until CSTM Phase 2 kicks in. However, we are slightly disappointed by the slight delay in the CSTM service. But the impact should be offset by expected higher FWPR earnings from 2015 onwards.
What You Should Do
Remain invested in the stock. With earnings kicking in from the CSTM and FWPR, we forecast a strong 3-year EPS CAGR of 71%. MyEG’s current valuation of 11.7x 2016 P/E looks attractive and this does not include potential earnings from the proposed road safety diagnostic kit project (RSDS). We also note that the stock will go ex of its 1:1 bonus issue on 8 Jan (this Thursday).
Source: CIMB Daybreak - 07 January 2015
