Strong performance for MyEG in 3QFY17
KUCHING: MY EG Services Bhd (MYEG) saw strong performance for the first nine months of its financial year 2017 (9M17) taking into account its latest figures for the third quarter of financial year 2017 (3QFY17).
Earnings during 3QFY17 came in at RM53.9 million, which translates into an impressive earnings growth of 62.8 per cent year on year (y-o-y), explained MIDF Amanah Investment Bank Bhd (MIDF Research).
This lifted the group’s 9MFY17 earnings by 54.5 per cent y-o-y to RM142 million.
“The increase in earnings 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,” said the firm in a note yesterday.
It was also attributed to the increase in revenue contribution from JPJ related services, and the increase in revenue contribution from motor vehicle trading related services.
“All in, MYEG’s 9MFY17 earnings came in at 71.6 per cent and 72.3 per cent of full year FY17 earnings estimates respectively. We expect the positive momentum will continue to be seen in 4QFY17.”
Meanwhile, MYEG’s 3QFY17 cash reserve has reduced by 25.3 per cent y-o-y to RM156.6 million. As a result, the net cash position has shrunk by 45.6 per cent y-o-y to RM55.7 million.
This led MIDF Research to maintain a target price of RM1.89 per share for MyEG.
“MYEG has an attractive business model which reap a healthy profit margin of more than 50 per cent. This will be further supported by the upcoming custom tax projects.
“However, we are concern with the declining cash reserve as this could limit the group’s future capital spending as well as the ability to fund for new merger and acquisition (M&A) opportunities.
“While we applaud the group’s active M&A exercise, we view that these acquisitions will not have significant impact on the group’s bottomline in the near term. Due to the steep increase in share price, we view that the current valuation is rather unattractive for potential investors to take position on the stock.