MyEG’s profit margin to be adversely impacted by government’s open tender exercise

KUCHING: MY E. G. Services Bhd’s ( MyEG) profit margin has been projected by analysts to be adversely impacted by the government’s implementation of an open tender exercise.

According to the research arm of MIDF Amanah Investment Bank Bhd ( MIDF Research), MyEG has an attractive business model which reaps healthy profit margins of more than 50 per cent.

MIDF Research noted that this will also be further supported by the foreign worker job matching and placement programme and hostel accomodation business.

It further noted that MyEG’s experience in building tax monitoring system, would place the group in a better position to clinche the sales and service tax ( SST) monitoring project.

“However, we expect the group’s profit margin to be adversely impacted by the government’s implementation of an open tender exercise as a policy to improve corporate governance,” the research arm said.

“Meanwhile, dividend yield is also expected to remain unattractive at approximately one per cent.”

After taking into consideration the aforementioned factors, MIDF Research maintained its ‘ neutral’ recommendation on the stock.

However, MIDF Research adjusted its financial year 2018 ( FY18) and FY19 forecasts for MYEG upwards to RM256 million and RM264 million, respectively.

“This is to take into the account the change in financial year end from June to September.

“In addition, we also incorporate the contribution from the tax monitoring system project.”

Subsequent to its earnings adjustment, the research arm also revised upwards its target price to RM1.55 per share, from RM0.81 per share previously.