Maintain BUY
MyEG’s immigration and healthcare segments stand to benefit from the
reopening of international borders. Moreover, we believe the market may
have underestimated the potential earnings growth from its
decentralised finance (DeFi) segment, which is gaining traction. At 22.1x
FY22E PER, its risk-reward appears attractive. Maintain BUY with an
unchanged TP of MYR1.47, based on 28x FY23E EPS (+1SD its 5Y mean).
Reopening to boost healthcare and immigration
Malaysia’s international border reopening from April 1st should benefit
MyEG’s immigration and healthcare segments. The Human Resource
Minister has received ~470k applications for foreign workers as at 1 April
2022, representing >40% increase over 2021’s registered foreign workers
of 1.1mil. Additionally, travellers (ex-Singapore) are required to undergo
COVID-19 testing within 24 hours of arrival, through either MyEG’s
breathalyser or professionally-administered RTK-Ag test. MyEG charges
MYR70/MYR100 per Malaysian/foreigner for its breath test; its rapid and
accurate detection could be the ideal option. We believe this could be
more than enough to offset revenue decline from its quarantine business.
Developments on DeFi gaining traction
We understand that the Digital Yuan adoption is rapidly gaining traction,
with the pilot programme being rolled out to more cities in China (now
at 17) and payment service providers such as UnionPay incorporating
Digital Yuan as a payment option in its platform for merchants/users.
With greater adoption by the Chinese merchants, supply chain financing
and traceability in the trades between Malaysia and China could be the
most immediate viable application for MyEG’s Zetrix. MyEG stands to
benefit from the growth in transaction activities through the platform.
Large capex put in for development
MyEG’s balance sheet swung from a net cash of MYR230m end-3Q21 to a
net debt of RM71m end-4Q21 (Fig 5) due to elevated capex for its DeFi,
breath test equipment, as well as the hardware for its JPJ e-testing
project. While we have booked in a marginal revenue contribution of 2-
8% from DeFi in FY22-24E, we have yet to incorporate any incremental
growth from the JPJ e-testing project, which is still in pilot stage. If it
materializes, this could provide further upside to our estimates.