MyEG sees 30 per cent growth in 1QFY18 earnings

KU AL AL UMP UR: M yE G Services Bhd (MyEG) reported earnings of RM52.8 million for its first quarter of financial year 2018 (1QFY18), translating into an increase of 30.7 per cent year on year (y-o-y).

The improvement in earnings was mainly attributable to growth in volume of the group’s existing concession related services and higher profit margin of 53.8 per cent, said MIDF Amanah Investment Bank Bhd (MIDF Research) in a note yesterday.

“The increase in 1QFY18 revenue of 24.7 per cent y-o-y was mainly attributable to higher transaction volumes from the online renewal of foreign workers’ permits (FWP), foreign workers rehiring programme services (FWR services) and foreign workers insurance from both FWP as well as FWR services,” it explained in the report.

“It also saw an increase in revenue contribution from motor vehicle trading related services.”

However, the research house said the increase in the quarter’s revenue was partially offset by higher personnel related expenses and operating expenses to support the growth in FWP and FWR services; higher interest cost from the term loan to finance MYEG’s newly acquired offices and; higher depreciation charges.

All in, MyEG’s 1QFY18 financial performance came in within the firm and consensus expectations, accounting for 20.4 and 20.5 per cents of full year FY18 earnings estimates respectively.

Nevertheless, MIDF Research forewarned that MyEG’s net cash position remained depressed.

“MyEG’s net cash position as at 1QFY18 amounted to RM47.6 million – this represents a decline of 7.9 per cent y-o-y as compared to 1QFY17 net cash position of RM51.7 million,” it said, leading them to maintain a neutral call on the stock .

“M YE G has an attractive business model which reaps healthy profit margins of more than 50 per cent. This will also be further supported by foreign worker hostel accomodation business.

“However, we expect its dividend yield to remain unattractive at approximately one per cent. Our view is premised on the declining net cash position of the group.

“In addition, at current share price we view that positive outlook of the group has been largely priced in. MyEG’s share price has appreciated by approximately 30 per cent on a year-to-date basis.

“All factors considered, we are maintaining our neutral recommendation on the stock.”