Charging ahead with new services
? My E.G. Services’ (MyEG) FY21 net profit was in line, at 98% of ours and Bloomberg consensus full-year estimates. FY21F net profit grew 18% yoy.
? We see new services, such as E-Testing and BNPL scheme, and a recovery in job matching service for migrant workers to drive MyEG’s FY22F net profit.
? Reiterate Add with a lower RM1.20 TP, based on a lower 23x CY23F P/E.
4Q21 and FY21 core net profit grew 3% qoq and 18% yoy
MyEG’s revenue in 4Q21 rose 50% qoq mainly due to higher take-up of its private quarantine service, MySafeTravel (MST) and its related ancillary services as the government closed down its quarantine centre and allow ed private quarantine arrangements. The group also attributed the higher sales to resumption of its E-service centres as the nationwide lockdown was lifted. Overall, net profit grew 3% qoq in 4Q21.
For FY21, MyEG’s revenue rose 36% yoy due to: 1) higher contribution from new concession services for the Road Transport Department (RTD), such as online renewal of motorcycle insurance, road tax and driver’s licence; 2) contribution from new healthtech services, which include Covid-19 screening and MySafeQ; and 3) higher online transaction volume processed from existing concession and commercial services as more users opt for online channels. Overall, MyEG’s FY21 net profit rose 18% yoy.
Charging ahead with new services in 2022F
MyEG is in the midst of running a pilot run for the Automated Training and Driving Test System (E-Testing) for RTD. The group expects to complete the pilot run and certification by end-1Q22F and begin rollout by 2Q22F. We see E-testing as a new revenue driver for MyEG, with potential revenue of up to RM150m per year based on RM150 average revenue per applicant. In addition, MyEG recently partnered with A Tech Insure to offer Malaysian civil servants motor vehicle takaful coverage and road tax renewal service by
way of an interest-free Shariah-compliant Qard loan facility with payments via a salary deduction plan over up to 10 months. We see the new innovative service as another form of buy now pay later (BNPL) scheme for civil servants, with minimal default risk. We expect this scheme to raise MyEG’s share of Malaysia’s road tax renewal and insurance markets from 60% and 5% to 75% and 15%, respectively. Essentially, this will drive stronger earnings from RTD-related services in FY22F. Apart from that, we believe the potential reopening of Malaysia’s borders from 2Q22F could drive the recovery in MyEG’s
job matching service and higher take-up for its breath-test Covid-19 screenings.
Raise FY22-23F EPS by 4-5%; Reiterate Add with RM1.20 TP
We raise our FY22-23F EPS by 4-5% as w e assume higher contribution from Covid-19 screening follow ing the rollout of breath test and commercialisation of E-testing services with RTD. Reiterate Add with a lower RM1.20 TP, as w e peg our valuation to a lower 23x CY23F P/E, in line with MyEG’s 5-year mean P/E, vs. 26x at +0.5 s.d. above mean previously in view of weak sentiment in the tech sector.