KUALA LUMPUR (Feb 8): Even after excluding immigration services which are expected to contribute to about 18%-21% of MyEG Services Bhd's revenue and profit after tax for the financial year ending Dec 31, 2023 (FY2023) and FY2024, the resulting lower target price (TP) of 82 sen is still 17% higher than its last closing price of 70 sen, said CGS-CIMB.
The research house, which kept its "add" call on the counter but lowered its TP to RM1, based on a lower price-earnings ratio of 20 times from 22 times previously, said these services include the immigration services concession which contributes about RM70 million in annual revenue, based on the RM208 million three-year extension signed in 2020, as well as ancillary services related to foreign workers outside of the concession, which contribute a further RM70 million.
"We have also not factored in new earnings potential from its Zetrix blockchain despite the group expecting to see material earnings contributions from its Web3 development in FY2023," wrote analyst Mohd Shanaz Noor Azam in a note on Wednesday,
He added that the market had overreacted to news that immigration-related services, including those managed by external parties, could be reverted back to the Immigration Department by 2025 with the potential roll-out of the National Integrated Immigration System (NIISe) project.
"MyEG said it had not held any meetings with either the Ministry of Home Affairs or Immigration Department on the intention to converge immigration transactions under the NIISe. The company added that it expects to maintain its foreign worker and maid permit renewal [services] until at least 2025.
"In addition, we believe MyEG stands to receive another extension of its immigration-related services concession, which is due in May 2023, given that NIISe would not be ready anytime soon. We believe this is the optimal outcome in the near term, given that we do not expect the government to immediately replace the incumbent service providers and risk a public backlash if the new system fails to deliver," he wrote.
On Tuesday, MyEG's share price plunged to a 26-month low of 70 sen on the NIISe news. The rout erased RM2 billion from the stock's market capitalisation as it hit RM5.21 billion.
It was also the most actively traded stock on Bursa Malaysia, with 1.02 billion shares changing hands.
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