Lowering TP
The Health Ministry yesterday announced a relaxation of on-arrival
testing requirements, a development likely to impact utilisation of
MyEG’s breath test services. We trim our FY22-24E earnings by 10-18% to
reflect lower testing volumes. We now project FY22E earnings to fall by
9% due to lower Healthcare revenue, but to be partially cushioned by the
Immigration and Transportation segments. Maintain BUY while trimming
TP to RM1.28, based on unchanged 28x FY23E EPS, (+1SD vs. 5-year
average).
Relaxation of on-arrival testing requirement
As part of the nation’s shift towards endemic phase, the Health Minister
yesterday announced that the requirement to perform on-arrival Covid19 test for travellers will be narrowed to just the partially vaccinated or
unvaccinated travellers above 12 years old, effective 1 May 2022. This
will significantly impact MyEG’s breath test volume going forward, given
that most travellers are likely to be fully-vaccinated and would no longer
be required to undergo the screen test upon arrival.
Trimming estimates to reflect lower Healthcare rev
We trim our FY22-24E estimates by 10-18% to factor in the lower
Healthcare revenue. We cut our breath test volume assumption by ~80%,
from 2-2.5mil to 200k-400k, but maintain ASP of RM80 per test. We
estimate the revenue contribution share from the healthcare segment to
drop from 20-23% to just 5-8% in FY22-24E. As a result, we now project
FY22E earnings to drop by 9%, before recovering by 10-21% in FY23-24E.
Other segments may cushion the impact
We however still expect positive growth from the other e-government
services, namely Immigration (mass foreign worker rehiring) and
Transportation (resumption of driving license application activities).
Elsewhere, revenue upside could also come from MyEG’s e-JPJ driving
test, and higher-than-expected transaction activities from its Zetrix
platform, the latter seeing positive traction through growing adoption of
the Digital Yuan and demand for traceability in the supply chain.