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Thursday, September 25, 2014

Bullish outlook lifts MyEG share price


PETALING JAYA: MyEG Services Bhd’s share price soared 6.5% to RM3.43 on active trade after CIMB Research raised its target price to RM5.28 with bullish earnings outlook.
Analyst Nigel Foo said growth would be primarily driven by the impending rollout of the customs service tax monitoring (CSTM) system, which MyEG is developing for the Government.
Another major earnings kicker could come from ongoing testing of the road safety diagnostic system (RSDS) for express buses and commercial lorries.
The project is already at the pilot testing phase with the Land Public Transport Commission.
“The next few years should be interesting for MyEG,” Foo said, valuing the stock at 21 times its projected earnings in calendar year 2016.
“Our three-year EPS CAGR (earnings per share compound annual growth rate) forecast of 54% for MyEG does not include any potential earnings from RSDS,” he said in a note yesterday following a recent company visit.
Shares in MyEG have risen 17% since the start of the month ahead of the CSTM launch on Oct 1. However, delays in getting the final approval from the Government may push the launch date to January.
CIMB yesterday trimmed earnings estimate for year ending June 30, 2015 (FY15) by 6% to RM75mil to reflect the delay, but kept its forecast for FY16 at RM117.8mil.
“The company has been working on the CSTM project for the past few years and is only waiting for the final approval,” Foo said.
The report alluded that the Government had agreed in principle to a revised plan for MyEG to earn a fixed fee, as opposed to the earlier revenue sharing plan for the CSTM system.
The revenue sharing plan drew a lot of attention to MyEG.
Phase One of the CSTM project involves monitoring the 6% service tax collected from around 60,000 restaurants and entertainment outlets. The 6% Goods and Services Tax (GST) will be implemented on April 1, adding 40,000 outlets to MyEG’s coverage.
Phase Two of the CSTM project will involve the retail sector from April 2015 onwards. There are about 500,000 retail outlets nationwide.
All businesses with annual revenue in excess of RM500,000 will have to register for GST with Customs before the end of the year.
“We expect Phase Two to kick in FY16,” Foo said, forecasting MyEG’s net profit to increase to RM184.6mil in FY17. The company made a net profit of RM50.1mil in FY14.
While the bulk of MyEG’s growth will come from the CSTM project, the company is also busy expanding new services such as the foreign workers permit renewal and the voluntary vehicle online transfer services to support its earnings outlook over the next few years.
“Its new project, the road safety diagnostic system (RSDS) could surprise on the upside next year,” Foo said.
As it is, MyEG’s RSDS is at the pilot testing phase for commercial buses. It is learnt that the authorities have made it mandatory for commercial buses to install a road safety diagnostic kit (RSK) over the next 12 months. Other than MyEG, there are at least three other companies offering RSKs to commercial bus companies.

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