MY E.G. SERVICES BHD

By UOBKayHian Research Hold (maintained) Target price: RM2.29

POST-SITE visit to My E.G. Services Bhd’s (MyEG) first accommodation site for foreign workers, UOBKayHian Research projected the e-government services provider’s new business to deliver pre-tax profits of RM32.4mil and RM86.4mil in FY18 and FY19 respectively.

Currently, MyEG is on track to grow the new foreign worker accommodation segment to becoming the largest revenue contributor for the company beyond FY19, backed by its recent land acquisition in Johor.

“MyEG is eyeing about 500 sites in aggregate to accommodate about one million foreign workers. We believe the potential from the new business is as high as RM2bil in annual revenue.

“Ultimately, this segment is expected to make up 24.5% and 46.2% of FY18 and FY19 group revenue respectively, forming the largest revenue segment in FY19,” said the research house in a note.

It noted hat MyEG had two fully-occupied foreign worker accommodation pilot sites in Melaka and was currently negotiating for the third site. The group has also agreed to lease an 8.9-acre land site from the Johor government for an accommodation site with a bed capacity of about 10,000 units.

UOBKayHian Research is “positive” on MyEG’s new business ventures namely the foreign worker accommodation service and the goods and services (GST) monitoring programme, as both ventures could lift the company’s earnings four-fold by FY22.

This expectation was primarily attributed to the accommodation service segment which is anticipated to bring in over RM650mil in annual pre-tax profit, based on the long-term target of opening over 500 sites in Peninsular Malaysia. In addition to that, a full roll-out of the targeted 500,000 GST monitoring devices would translate into a pre-tax profit of RM125mil per annum.