MYEG unperturbed by share price drop MYEG unperturbed by share price drop
MD remains unperturbed, believes govt will renew concessions
THE last month has not been fun for shareholders of e-government concessionaire MYEG Services Bhd due to a fall in the latter’s share price.
Some market talk has it that the tech company’s golden days of recurring income from prized concessions may be in jeopardy.
On Thursday, shares in MYEG closed at RM1.19, which was down 17% on a one-month basis, and some 29% on a three-month basis.
MYEG, which had a market capitalisation of some Rm9bil prior to the 14th general election (GE14), today has a market capitalisation of Rm4.29bil.
The recent selling pressure on the stock has been mainly coming from foreign funds.
Chief among the fund’s concerns are rumours that the Transport Ministry is reviewing the road tax system by replacing the conventional sticker with radio frequency identification (RFID).
Then, there is the 15% foreign worker cap on Malaysia’s workforce by 2020.
The Pakatan Harapan government recently announced that it aims to cap the employment of foreign labour to below 15% of the total workforce in the country by 2020.
There were various measures announced in Budget 2020 to reduce the reliance on foreign workers.
The concern is that this may negatively affect MYEG’S online renewal of temporary employment passes for foreign workers.
Also, MYEG’S e-government concessions are expiring in May 2020.
The concessions that are up for renewal include the online renewal of foreign workers’ permit and insurance, the renewal of the road tax, testing, issuance and renewal of the driver’s licence, vehicle ownership transfer, enquiry and payment of compounds, and more.
According to Bloomberg data, Blackrock Inc disposed of 19.43 million MYEG shares on Oct 15 and reduced its stake to 0.33% or 11.51 million shares.
Vanguard Group Inc disposed of 21.11 million shares on Sept 30 and cut its stake to 1.55% or 53.83 million shares.
However, MYEG founder and managing director Wong Thean Soon, better known as T.S. Wong, remains sanguine about the prospects of his company.
For one, he reckons that there is a common misperception that MYEG will be unable to continue servicing its users if its concession is not extended.
“We believe we have all the data on our users and the infrastructure in place to continue providing the same level of service to our users. That said, we remain fully convinced that our concession will be extended,” says Wong in e-mail replies to Starbizweek.
Acknowledging the fall in MYEG’S share price, Wong says he cannot predict if this is the start or end of foreign selling.
“I always believe the stock price will find an equilibrium. Nothing has fundamentally changed over the past two weeks, hence it is all about perception. Understandably, some investors are disappointed with the slow pace of new initiatives, but I wish to assure that it is coming along slowly albeit surely.
“As always, the best way is to continue working hard to deliver results. There is no point being overly fixated with stock prices,” says Wong.
Notably, though, MYEG does appear to be taking an active stance in supporting its share price.
On Oct 22, MYEG started buying back its shares when it acquired one million shares between RM1.23 and RM1.24.
The following day, it purchased another 1.5 million shares at RM1.19. MYEG now holds some 3.45% of its shares in treasury.
“We have always been doing share buybacks when we feel that the market is wrongly pricing the company, and we have been proven correct almost always in the past,” says Wong.
Wong’s vehicle Asia Internet Holdings Sdn Bhd is the single largest shareholder of MYEG with a 23.63% stake. He owns another 7.06% direct stake in the company.
MYEG provides e-government services, including the issuance and renewal of the driver’s licence, the renewal of the vehicle road tax, the renewal of foreign workers’ permits and traffic offence summons payments.
UOB Kayhian remains positive on MYEG. The research house continues to have a “buy” call on the stock with a target price of RM1.71.
The research house opines that the RFID development will not change the need for road tax renewal as well as insurance.
UOB Kayhian is also unperturbed by the 15% foreign worker cap, as this has always been the case and Malaysia’s current foreign worker numbers of two million is still below the cap of 2.2 million, allowing for a 10% growth.
UOB Kayhian is confident that MYEG will be able to extend its concession this round, riding on the lack of other alternatives so far.
“Our earnings growth is mainly attributed to higher job matching services, thanks to the unfreezing of the foreign worker intake since July 2019.
“Consequently, we are expecting its first sequential growth in the fourth quarter of 2019 since GE14 and a 20% earnings growth in financial year 2020,” says UOB Kayhian.
Another potential negative for MYEG is the delay in the e-visa tender, which has been a point of concern.
The current concessionaire, Ultra Kirana, whose contract is expiring this month is expected to continue its service until the government announces the next contract winner.
In a note on Wednesday, UOB Kayhian gathered that MYEG’S management still believes the current visa system will go on, as the incumbent’s concession is expiring in October 2019.
“Furthermore, there are various security lapses of the system, and management is guiding for the tender to be open in November 2019,” said UOB Kayhian.
Venturing into digital banking
Meanwhile, MYEG is exploring the digital banking space, as the e-government services provider looks to boost its revenue stream from this potential segment.
Analysts say the move is viewed as positive, as it would propel the company’s growth amid the company’s share price recently coming under pressure, with MYEG’S e-government concession slated to expire in May next year.
A MYEG spokesperson tells Starbizweek that it is keen in the area of digital banking and will scout for opportunities in the virtual banking business.
He says, “We have had preliminary discussions with some potential partners with complementary strengths, but will wait for the guidelines from the central bank for greater clarity.
“As per the Budget 2020 announcement, the government expects to call for bids for the digital banking licence early next year.
“This is an area of great interest to MYEG, given our wide user base and the transactional nature of our services. In other markets like Hong Kong, where licences have already been issued, the winners were a combo of IT players in partnership with financial institutions leveraging on their respective strengths.”
The country’s digital bank licensing framework will be issued for industry consultation by year-end, according to Bank Negara.
Governor Datuk Nor Shamsiah Mohd Yunus was reported as saying that the framework, which is now being finalised, would be on the central bank’s regulatory requirements for interested parties to be given a licence. More than 10 parties to date have expressed interest in setting up virtual banks in Malaysia.
Hong Kong began issuing digital bank licences early this year, while Singapore plans to issue up to five such licences this year.
As for its expansion, which MYEG is anticipating to account for 50% of its revenue from overseas operations within three years, he notes that the group is presently bidding for some e-government services in Bangladesh.
Furthermore, the spokesperson notes that the company already has the mandate from the Jakarta Provincial Government to implement its tax monitoring system encompassing the whole of Jakarta and installation is underway right now.
“By next month, our partnership with Land Bank of Phillipines will go live and enable us to offer up to 400 government services on our Philippine portal. Hence, we already have a lot on our plate and will be focusing on these markets and not spread ourselves too thin,” he stresses.
The spokesperson says all of its three foreign markets – the Philippines, Indonesia and Bangladesh – have strong potential due to their market size.
“They are obviously at different stages of implementation, with the Philippines being the most mature followed by Indonesia and Bangladesh,” he adds.
On another note, the spokesperson says MYEG has submitted a bid for the integrated immigration system project and will participate in bids for other services within the immigration as well as other government agencies when bids are called.
We have had preliminary discussions with some potential partners with complementary strengths, but will wait for the guidelines from the central bank for greater clarity.
MYEG spokesperson