MYEG (0138) - MY E.G. Services - Just a slight delay
Target RM3.90 (Stock Rating: ADD)
At only 49% annualized FY14 net profit, MyEG’s 1HFY15 core net profit was broadly in-line with our expectations as 2H is seasonally stronger half and earnings contribution coming in from CSTM and FWPR services. We cut our FY15 EPS forecasts by 31% but due to slower take-up rate for FWPR services and few months delay in starting CSTM service nationwide. Target price is based on unchanged 21x CY16 P/E (in line with its peers). The stock remains an Add. Potential re-rating catalysts for the stock include successful launch of the CSTM project in Mar and higher takeup rates for its FWPR services.
1HFY15 net profit up 33% yoy
MyEG’s 1HFY15 revenue was up 31% yoy while net profit growth was a higher 33%. MyEG’s higher 1HFY15 revenue growth was mainly due to organic growth in existing services and also contribution from new services like the voluntary online transfer of vehicles (VVTS) and foreign workers working permit renewal services (FWPR). 1HFY15 EBITDA margin was higher at 57.9% (compared to 1HFY14’s 57.5%) mainly due to greater economies of scale The company declared a 0.5 sen interim, in line with our expectations. MyEG’s dividend policy is to pay at least 30% of net profit.
CSTM to start in Mar
The company’s custom service tax monitoring (CSTM) Phase 1, which involves monitoring the current 6% service tax (will be replaced by 6% GST in Apr) from entertainment outlets targets around 60,000 outlets nationwide. Currently, businesses using CSTM in their outlets is on a voluntary basis with full nationwide implementation only in Apr/May this year. If all goes well, MyEG could launch CSTM Phase 2, covering the retail sector (expected to be around 500,000 outlets) in the next 12-18 months.
Update on FWPR services
The Cabinet is allowing the Immigration Department counters for foreign workers’ permit renewal to be opened beyond Feb 28. “The counters will remain open until a more comprehensive plan to resolve the issue is achieved,” says Transport Minister. However, until the government introduces a more comprehensive for the foreign worker permit renewal (which is likely soon), we will maintain our earnings forecast assumption of 90% take-up rate for MyEG’s FWPR services in FY16/17. Based on our sensitivity analysis, every 10% decline in MyEG’s FWPR take uprate could dampen its annual net profit by RM10m.
Source: CIMB Daybreak - 02 March 2015
Target RM3.90 (Stock Rating: ADD)
At only 49% annualized FY14 net profit, MyEG’s 1HFY15 core net profit was broadly in-line with our expectations as 2H is seasonally stronger half and earnings contribution coming in from CSTM and FWPR services. We cut our FY15 EPS forecasts by 31% but due to slower take-up rate for FWPR services and few months delay in starting CSTM service nationwide. Target price is based on unchanged 21x CY16 P/E (in line with its peers). The stock remains an Add. Potential re-rating catalysts for the stock include successful launch of the CSTM project in Mar and higher takeup rates for its FWPR services.
1HFY15 net profit up 33% yoy
MyEG’s 1HFY15 revenue was up 31% yoy while net profit growth was a higher 33%. MyEG’s higher 1HFY15 revenue growth was mainly due to organic growth in existing services and also contribution from new services like the voluntary online transfer of vehicles (VVTS) and foreign workers working permit renewal services (FWPR). 1HFY15 EBITDA margin was higher at 57.9% (compared to 1HFY14’s 57.5%) mainly due to greater economies of scale The company declared a 0.5 sen interim, in line with our expectations. MyEG’s dividend policy is to pay at least 30% of net profit.
CSTM to start in Mar
The company’s custom service tax monitoring (CSTM) Phase 1, which involves monitoring the current 6% service tax (will be replaced by 6% GST in Apr) from entertainment outlets targets around 60,000 outlets nationwide. Currently, businesses using CSTM in their outlets is on a voluntary basis with full nationwide implementation only in Apr/May this year. If all goes well, MyEG could launch CSTM Phase 2, covering the retail sector (expected to be around 500,000 outlets) in the next 12-18 months.
Update on FWPR services
The Cabinet is allowing the Immigration Department counters for foreign workers’ permit renewal to be opened beyond Feb 28. “The counters will remain open until a more comprehensive plan to resolve the issue is achieved,” says Transport Minister. However, until the government introduces a more comprehensive for the foreign worker permit renewal (which is likely soon), we will maintain our earnings forecast assumption of 90% take-up rate for MyEG’s FWPR services in FY16/17. Based on our sensitivity analysis, every 10% decline in MyEG’s FWPR take uprate could dampen its annual net profit by RM10m.
Source: CIMB Daybreak - 02 March 2015
