Pursuant to this latest corporate development, CIMB Research had yesterday downgraded MyEG from an “add” to a “hold” rating with a target price of RM1.46 following the recent outperformance in its share price.
PETALING JAYA: MY E.G. SERVICES BHD (MyEG) saw its shares falling abruptly on Bursa Malaysia and ended the day 18 sen lower to RM1.30.
The firm, an online government services provider, had announced at the end of last week just before the long weekend that it had received a notice from the government to continue with the provision of e-government services until June 30.
The company had also received an official notification from the government to continue with the provision of immigration related services until further notice, it said in the Bursa Malaysia announcement on Friday.
“This is to allow the government sufficient time to finalise the status of the extension of these agreements subsequent to their expiry on May 22,2020, ” it said.
MyEG said in the announcement that it is committed to pursuing the extension of these agreements from the government.
Pursuant to this latest corporate development, CIMB Research had yesterday downgraded MyEG from an “add” to a “hold” rating with a target price of RM1.46 following the recent outperformance in its share price.
“The stock has done relatively well, surging 86% from its year-low on March 23. We still peg our valuation to 22.4 times 2021 forecast price to earnings ratio (PER) which is a 40% premium over our technology sector target PER of 16 times given its superior profit margin among domestic IT sector providers, ” it said.
It also said that MyEG expected a delay in the e-visa project tender date line beyond the May 2020 due to the implementation of the movement control order (MCO) and travel restrictions that are being imposed on foreigners presently.
“We understand that MyEG and its partners are among the frontrunners bidding for this project. We see downside risks to MyEG’s earnings if it does not secure new growth drivers beyond FY20 due to the expiry of its tax pioneer status in Apr 2021 which will effectively raise its effective tax rate from less than 5% to 24% (corporate tax rate), ” it said.
On the renewal of the immigration and e-government services contract, CIMB Research said MyEG expected to secure long-term agreements for the master concessions within the next two months.
“We think MyEG remains in the prime position to secure long-term extensions given its extensive nationwide coverage, and the lack of alternative solutions, ” it said.
https://www.thestar.com.my/business/business-news/2020/05/28/myeg-to-seek-extension-of-govt-agreements
