KUALA LUMPUR: The notion that My EG Services Bhd (MyEG) is politically linked to the previous administration no longer seems to dampen shareholders’ confidence over the electronic government service provider’s chances of securing new public contracts.
Buying momentum has been building up in MyEG, which analysts believe is driven by continued acknowledgement of the company’s successful expansion in Indonesia and its bright prospects for two government contracts at home, thanks to the firm’s proven track record.
MyEG’s share price has soared over 30% since early February, closing at RM1.37 last Friday.
“The keyword is a proven track record, barring everything else,” BIMB Securities Sdn Bhd analyst Afifah Abdul Malek told The Edge Financial Daily.
Afifah said the share price rally in the last couple of weeks is especially driven by shareholders’ optimism that MyEG could secure the contracts for the foreign visa system (VLN) and the Integrated Immigration System (IIS).
According to reports, the awarding of both contracts are expected to be announced in the first quarter. Afifah believes the announcement for the VLN would come sooner than the IIS.
“The climb on MyEG share price is perhaps due to the anticipation that the VLN contract could be announced as early as next week. Shareholders are anticipating that MyEG could win the contract given its partnership with a China-based travel agency,” said Afifah.
Based on the previous VLN contract agreement, the project could see its vendor receive a payment of RM100 per tourist. In 2018, Malaysia received 25.83 million tourists, of whom 11.2% or 2.9 million were Chinese nationals.
Tourism and Culture Minister Datuk Mohamaddin Ketapi recently said that Chinese nationals continued to make up about 11% of total tourist arrivals in Malaysia last year. This means that MyEG could rake in about RM290 million in revenue from Chinese tourists alone, should it be granted the VLN contract.
On the IIS contract, Afifah said there is a possibility that the project would be awarded to a consortium instead of a single company. Among the companies bidding for the project are Iris Corp Bhd, Scicom (MSC) Bhd and HeiTech Padu Bhd.
“If this is indeed true, it would definitely widen the chances of MyEG to be part of the project,” she added.
The Edge reported that bids ranging from RM1 billion to RM1.8 billion have been submitted by some 30 bidders for the IIS, which is replacing the now defunct RM3.5 billion National Immigration Control System awarded to Prestariang Bhd.
Meanwhile, MIDF Amanah Investment Bank Bhd analyst Martin Chuan Loong Foo said, the MyEG share price rally could be contributed by shareholders’ positive reaction towards the firm’s recent venture in Indonesia.
On Jan 13, MyEG announced that its Indonesian associate PT Cartenz Inti Utama had secured additional government mandates to roll out its tax monitoring system in seven provinces besides Jakarta. This followed the company’s successful commencement of the system implementation in Jakarta.
“The one in Jakarta was a pilot project done free-of-charge. But the new contracts secured for the other provinces are chargeable. This development still has a positive effect on the stock price although it was announced about a month ago,” said Martin.
On the technical front, Malayan Banking Bhd stock dealer Muhammad Rafiq Jajuli said MyEG has ended its seven months long downtrend after showing signals of strength since Feb 3.
“There’s a breakout from the downtrend line which indicates that the downward trend is over. The stock has seen a consolidation phase and the price now settles above the Ichimoku Cloud which suggests that the uptrend is intact,” he said.
The Ichimoku Cloud is a collection of technical indicators that show support and resistance levels, as well as momentum and trend direction.
Research houses including MIDF Investment, BIMB Securities and CGS-CIMB Securities Sdn Bhd have a buy call on MyEG with target prices between RM1.49 and RM1.96, citing its promising geographical diversification as one of the factors, compared with last Friday’s closing of RM1.37.
Apart from its Indonesia venture, MyEG recently announced that its Philippines subsidiary MYEG Philippines Inc has launched its first phase of digital electronic government services in the Philippines, thanks to its partnership with a state-owned firm in the country.
MyEG posted a net profit of RM60.43 million on revenue of RM119.14 million for the quarter ended Sept 30, 2019. Earnings per share (EPS) was 1.7 sen for the quarter.
For the 12-month financial period ended Sept 30, 2019, MyEG posted a net profit of RM235.31 million on a revenue of RM476.25 million. EPS stood at 6.7 sen.
There are no comparative figures for this period as the group has changed its financial year end from Sept 30 to Dec 31. As such, the next set of audited financial statements will be for a period of 15 months.
Likewise, Datasonic Group Bhd share price has also fared well. The stock has leaped over 60% since December last year from RM1 to slightly above RM1.60 last month. It retreated to RM1.51 last Friday.
Which is the better bet? It is not known as yet, but one thing is for sure one’s success could be at the expense of the other.