MYEG (0138) - CIMB Research retains MyEG target price at RM3.04


KUALA LUMPUR: CIMB Equities Research is maintaining its earnings per share (EPS) forecasts and target price of RM3.04 for MyEG Services, which is an upside of 43.4% above the last traded price of RM2.12.

The research house said on Monday this based on an unchanged 25.2 times 2019 forecast price-to-earnings (P/E), a 20% premium over the technology sector.

“The premium is to reflect its large market capitalisation and 36% FY18-20F EPS CAGR. The successful nationwide launch of the GST monitoring system (GSTM Phase 2) is a potential re-rating catalyst while further delays in the project are its downside risks,” it said.

CIMB Research said a news report stated MyEG moved into the business of leasing cars through its subsidiary, MyEG Credit just started a few months ago.

The report quoted MyEG managing director TS Wong there was no need for any licensing to venture into this business. Wong added that one of the key initiatives MyEG is looking at is private leasing.

“This news was a positive surprise to us. Private leasing is still a small business in this country, currently dominated by the premium brands. With services like Uber and Grab, we feel there is no longer any need to own a car today, which makes leasing an interesting proposition.

“In addition, leasing makes sense for Uber and Grab drivers. They need not worry about maintenance, insurance renewal and road tax renewal,which will be handled by the leasing company,” it said.

The research house noted that MyEG’s leasing business is still small and is currently providing leasing services for all brands.

“We believe its intention is to focus on supporting its online used car business, With the banks tightening lending on the purchase of houses and cars, now could be the right time for MyEG to grow its private leasing business. MyEG has the advantage of handling all car road tax renewals nationwide and it deals with most second-hand car dealers in the country.

“As at end-September, MyEG has RM47.6mil net cash. To grow its private leasing business, the company might need to gear up but we believe this is not likely in FY18F.

“This FY, the company should be using its operational cash flow to finance capex for its GST Monitoring Phase 2 project, which targets the retail sector, We estimate capex for this project to be RM400mil to RM500mil and for it to be completed in the next six to 12 months,” it said.