Ending on a high note
Maintain BUY
MyEG’s full-year results came in in-line with consensus but exceeded ours at 110% of full-year forecast, driven by higher demand for its healthcare screening/quarantine and e-government services. The growth momentum in 4Q21 may continue on the back of rising inbound travellers, return of foreign workers and higher e-Govt service activities. Maintain BUY on MyEG with a higher TP of RM1.47 as we roll forward our valuation to 28x FY23E EPS, still based on +0.5SD its 5Y mean.
Strong revenue growth in 4Q21
4Q21 earnings of RM80.6m were up 8% YoY. The better performance can be attributed to the sharp increase in revenue of 56%, driven by its Covid-19 health screening and quarantine business, the resumption in EService centers as lockdown measures were lifted, as well as higher volumes from its e-government services. EBITDA however grew by just 11% in 4Q21, likely due to higher expenses incurred from its new breathalyzer and decentralized finance (DeFi) businesses, both of which were approaching commencement stage. Full-year earnings were in-line with consensus estimates but exceeded ours by 10% due to lower-than-expected taxes. A final interim DPS of 1.03 sen was declared during the quarter, bringing FY21 DPS to 1.28 sen.
Swung to a net debt on higher investments
MyEG’s balance sheet swung to a net debt of RM71.3m in 4Q21, from a net cash of RM230m in 3Q21. We believe a large part of the group’s cash was utilised for the purchase of breathalyzer devices, following the exclusive contract award in December 2021, as well as the development cost for the Zetrix blockchain supernodes.
Firing on multiple cylinders
We slightly raise our FY22-23E earnings by 2% and introduce FY24E earnings. MyEG’s healthcare segment should benefit from the recovery in inbound tourists through its Covid-19 breathalyzer screening solution, as Malaysia’s international borders are likely to reopen by 1H22. Additionally, its immigration business could stand to benefit from the rehiring of foreign workers across multiple sectors in order to address the manpower shortage. Lastly, its new blockchain foray, set to go live by 2H22, could benefit from rising utilisation of China’s digital currency on international trading activities of China’s goods and services