MYEG (0138) : MY E.G. Services - Growth story continues
Target RM5.28 (Stock Rating: ADD)
At 64% of our forecast when annualised, MyEG’s 1QFY6/15 net profit was in line with our expectations as 1Q is a seasonally slow quarter and CSTM’s contribution is only expected to kick in from 2HFY15. MyEG is waiting for final government approval for the CSTM project. We maintain our EPS forecasts and Add recommendation. Our target price is based on an unchanged CY16 21x P/E (in line with its peers). Government’s final approval for the CSTM project and further developments on the road safety diagnostic system project are potential re-rating catalysts for the stock.
1QFY15 net profit up 41%
MyEG’s 1QFY15 revenue rose 36% but net profit growth was higher at 41%, mainly due to greater economies of scale. 1Q15 revenue growth came mainly from higher volumes for services like online foreign worker permit renewal and online transfer of vehicles. No interim DPS was declared, in line with our expectations.
Waiting for final government approval for CSTM
The company is waiting for the final approval from the government for the 6-year custom service tax monitoring (CSTM) concession. Phase 1 involves monitoring the 6% service tax from restaurants, pubs and massage parlours (annual revenue of above RM3m). This should involve around 60,000 outlets nationwide. Phase 2 will cover the retail sector, expected to be around 500,000 outlets. MyEG’s road safety diagnostic system (RSDS) project could also surprise on the upside in 2015. In Jul 14, the authorities made it mandatory for commercial buses to install a road safety diagnostic kit (RSK) over the next 12 months. If MyEG can capture 25-30% market of the commercial bus and lorry industry insurance premiums, it could collect RM58m-75m in insurance commission annually. Assuming 40% net profit margin, RSDS could contribute RM23m-30m to the company’s net profit annually. Our earnings forecasts do not include any potential earnings from RSDS.
1:1 bonus issue in early-Nov
In early-Nov, MyEG proposed a 1-for-1 bonus issue that would increase its issued share base to 1,200m shares. This exercise should make the stock more affordable to retail investors and further help the stock’s trading liquidity. The bonus issue should be completed in 1QCY15.
Source: CIMB Daybreak - 01 December 2014, Full PDF Report
Target RM5.28 (Stock Rating: ADD)
At 64% of our forecast when annualised, MyEG’s 1QFY6/15 net profit was in line with our expectations as 1Q is a seasonally slow quarter and CSTM’s contribution is only expected to kick in from 2HFY15. MyEG is waiting for final government approval for the CSTM project. We maintain our EPS forecasts and Add recommendation. Our target price is based on an unchanged CY16 21x P/E (in line with its peers). Government’s final approval for the CSTM project and further developments on the road safety diagnostic system project are potential re-rating catalysts for the stock.
1QFY15 net profit up 41%
MyEG’s 1QFY15 revenue rose 36% but net profit growth was higher at 41%, mainly due to greater economies of scale. 1Q15 revenue growth came mainly from higher volumes for services like online foreign worker permit renewal and online transfer of vehicles. No interim DPS was declared, in line with our expectations.
Waiting for final government approval for CSTM
The company is waiting for the final approval from the government for the 6-year custom service tax monitoring (CSTM) concession. Phase 1 involves monitoring the 6% service tax from restaurants, pubs and massage parlours (annual revenue of above RM3m). This should involve around 60,000 outlets nationwide. Phase 2 will cover the retail sector, expected to be around 500,000 outlets. MyEG’s road safety diagnostic system (RSDS) project could also surprise on the upside in 2015. In Jul 14, the authorities made it mandatory for commercial buses to install a road safety diagnostic kit (RSK) over the next 12 months. If MyEG can capture 25-30% market of the commercial bus and lorry industry insurance premiums, it could collect RM58m-75m in insurance commission annually. Assuming 40% net profit margin, RSDS could contribute RM23m-30m to the company’s net profit annually. Our earnings forecasts do not include any potential earnings from RSDS.
1:1 bonus issue in early-Nov
In early-Nov, MyEG proposed a 1-for-1 bonus issue that would increase its issued share base to 1,200m shares. This exercise should make the stock more affordable to retail investors and further help the stock’s trading liquidity. The bonus issue should be completed in 1QCY15.
Source: CIMB Daybreak - 01 December 2014, Full PDF Report
