Government funds cut stake in MyEG

IT is not just the foreign funds that are selling.

Local institutional funds are also taking heed of changes in store and selectively trimming down their stakes in a few companies on Bursa Malaysia which are bound to be negatively impacted by the positive changes taking place in the country, thanks to the new Pakatan Harapan government. Case in point: MyEG Services Bhd. Filings this week revealed that the two largest local institutional funds have more than trimmed their stakes in MyEG. The Employees Provident Fund (EPF), which had held close to 6% of MyEG’s shares, has now shrunk to become a non-substantial shareholder in the company. And on Friday alone, Kumpulan Wang Persaraan (KWAP) disposed 31 million shares in MyEG.

Both the EPF and KWAP are probably sitting on hefty gains from their investments in MyEG, which has prompted them to reduce their holdings in the stock that provides e-government services such as renewal of road tax and insurance online.

Since the historic 14th general election on May 9, MyEG has seen some RM6.6bil being wiped out of its stock. This is understandable, considering that it had a large foreign shareholding base. To recap, MyEG is perceived to be linked to the previous Barisan Nasional government on the grounds that it services are linked to government departments.

The company says that it has the ability to work for the government of the day and has built up a fair bit of expertise in the provision of its services. To be fair, MyEG has carved a presence in e-government services, especially for members of the public dealing with the Road Transport Department for renewal of road tax and licences. It also provides services for employers hiring foreign workers.

The downside to MyEG is the possibility of competitors emerging should the new government decide to allow more companies to provide e-government services. Secondly, its contracts from the government span around five years on average, which is a short time compared to other concessions.

And lastly, it has shareholders who are seen as closely aligned to the previous government.

When all these things are considered, investors seem to be taking a more careful stance. Hence the aggressive selldown by both foreign and local investors.

However, MyEG has a brandname that it has built for itself. Time will tell if these investors are right to have sold down from the once top-performing stock on Bursa Malaysia.