MyEG to benefit from higher transaction activities


MAYBANK Investment Bank Bhd (Maybank IB) has maintained a ‘Buy’ recommendation for MyEG Services Bhd with an unchanged target price of RM1.47 as it expects the company will benefit from border reopening and growth from decentralised finance (DeFi) segment.

According to its analyst, Syafiq Kadir, investors may have underestimated the potential earnings growth from the company’s DeFi segment, which is gaining traction.

He added MyEG’s immigration and healthcare segment will benefit from the borders reopening along with the traveller movement.

The Human Resource Ministry (MoHR) has received some 470,000 applications for foreign workers as at April 1, 2022, representing more than 40% increase over 2021’s registered foreign workers of 1.1 million.

The report also noted travellers (except from 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 RM70 for Malaysians and RM100 for foreigners for its breath test service and we believe this could be more than enough to offset revenue decline from its quarantine business,” the analyst wrote in his report last week.

As for MyEG’s DeFi segment, Maybank IB stated the Digital Yuan adoption is rapidly gaining traction, with the pilot programme being rolled out to more cities in

China and now spanning 17 cities. “It enables payment service providers such as UnionPay incorporating Digital Yuan as a payment option in its platform for merchants or users,” he said.

“Apart from that, we noted that MyEG has a joint venture with Bubi Technologies Co Ltd to co-develop Xinghuo BIF’s international getaway platform called Zetrix to enable connectivity and seamless supply chain management and financing between the Chinese merchants who have adopted Digital Yuan and the international players.

“Greater adoption by the Chinese merchants, supply chain financing and traceability in the trades between Malaysia and China could be the most immediately viable application for MyEG’s Zetrix,” the report added.

As a result, MyEG stands to benefit from increased transaction activity via the platform, which is expected to be ready for rollout in the first half of 2022, with supply chain traceability and financing solutions likely to be main features for the applications.

The investment bank noted MyEG’s balance sheet swung from a net cash position of RM230 million at the end of the third quarter of 2021 (3Q21) to a net debt position of RM71 million at the end-4Q21 due to the elevated capex for its DeFi, breath test equipment as well as the hardware for its Road Transport Department (RTD) e-testing project.

“We have booked a marginal revenue contribution of 2%-8% from DeFi in the financial year 2022 (FY22)-FY24E, and put on hold any incremental growth from the RTD’s e-testing project, as it is still in the pilot stage.

“As such, we maintain the ‘Buy’ recommendation on MyEG with an unchanged target price of RM1.47, based on 28 times FY23E,” the report noted. MyEG shares closed the trading week at RM1.01, giving it a market capitalisation of RM7.46 billion.