MYEG book-building exercise could boost earnings if properly deployed

KUCHING: MY EG Services Bhd’s (MYEG) book-building exercise could boost its earnings if properly deployed on projects such as JPJ e-testing and Zhifei Vaccine, Macquarie Equities Research (MQ Research) viewed.

This comes as MYEG is proposing to raise an estimated RM309 million via a 4.17 per cent private placement of 300 million new shares (instead of the 100 million initially planned).

MYEG has completed the first tranche of its 2020s placement, where 120 million shares were issued to raise circa RM216 million worth of capital.

MYEG has indicated that the utilisation of proceeds is to fund several ongoing projects, including health tech (Zhifei vaccine clinical trials, breathalyser test), road transport e-testing project, and blockchain-related solutions in the next 12 to 24 months.

“With RM309 million expected to be raised from this placement, MYEG will potentially double its net cash position, as it is already carrying RM360 million net cash as of 2Q FY21.

“At this point, MYEG has utilised 53 per cent of its RM216 million initial placement, which was mainly used for healthcare related services and asset purchases for its e-government services,” MQ Research said in a note yesterday.

Aside from that, out of this placement, 57 per cent will be used for the company’s newly announced blockchain-related initiatives, such as decentralised finance services and setting up supernodes that are compatible with China’s national blockchain infrastructure.

“Potential use cases related to the supernodes network are to provide solutions such as endto-end traceability and finance along the flow of goods between China and the rest of the world,” the research team added.

All in, it pointed out that MYEG is on track for a record year, with RM333 million adjusted net profit for FY21E.

The placement will dilute existing shareholders by four per cent, but if properly deployed MQ Research believed the cash would boost MYEG’s earnings base to potentially reach its bull-case scenario.