My E.G. Services Bhd (MYEG) is a digital e-government and commercial services provider in Malaysia. Last year, it made headline news among local investors for it had experienced a 60%-70% fall in stock prices in a few days after a change of leadership in the Malaysian Government. 

More than a year has passed. How is MYEG faring after a huge setback in 2018? In this article, I’ll cover on its financial results, future plans, and valuation ratios to reassess MYEG as an investment. Thus, here are 12 key things to know about MYEG before you invest.

  • Range of Services
    For a start, MYEG is a link that enhances the efficiency of provision of a range of government services via its website, mobile app, kiosks and as well as its e-services centres across Malaysia. These services include:

    – Testing, Issuance, and Renewal of Drivers’ Licenses.
    – Transfer of Vehicle Ownerships. 
    – Renewal of Road Tax.
    – Renewal of Foreign Worker’s Work Permit.
    – Replacement of MyKad.
    – Insolvency Search.
    – Payment of Compound / Assessment / Summons to KL City Hall. 
    – Payment of Zakat

  • Financial Results
    MYEG has achieved rapid growth in revenues starting in 2016 where its revenues jumped from RM 141.5 million in 2015 to RM 562.3 million in 2018. This is attributable to substantial hikes in transaction volumes for foreign worker’s work permit and vehicle-related services over the past three years. It resulted in rapid hike in earnings from RM 68.1 million in 2015 to RM 201.5 million in 2017. In 2018, MYEG reported a significant decline in earnings to RM 129.0 million.

    This is because MYEG has made an impairment of:

    – RM 95.45 million due from an associate company.
    – RM 76.29 million in equipment


    They are both in relation to the abolishment of GST in 2018 which have been effective since mid-2018. Excluding the impairments made above, MYEG would have recorded RM 277.77 million in earnings in 2018.

Source: MYEG’s Annual Reports

Note:
2018* refers to a 15-month period from 1 Jul 2017 to 30 Sep 2018.

  • Last 12-Month Results
    For Q5 2018 (the quarter ended 31 December 2018), it has reported as much as RM 138.3 million in revenues and a net loss of RM 97.5 million due to the following GST-related transactions:

    – RM 19.94 million in deferred revenues.
    – RM 95.45 million due from an associate company.
    – RM 76.29 million in equipment. 


    Excluding these transactions, MYEG would have reported for Q5 2018:

    – RM 118.33 million in quarterly revenues.
    – RM 54.04 million in quarterly earnings.


    Thus, its latest 12-month financial results would be adjusted as follows:



Period
Group Revenue(RM Million)Shareholders’ Earnings (RM Million)Earnings per Share (EPS) (Sen)
Q5 2018118.3354.041.54
Q1 2019116.2358.661.70
Q2 2019121.7458.031.70
Q3 2019119.1358.201.70
Total475.43228.926.64



Over the last 12 months, MYEG has made RM 475.4 million in revenues and had generated RM 228.9 million in earnings or 6.64 sen in Earnings per Share (EPS).


  • Balance Sheet Strength
    As of 30 June 2019, MYEG’s non-current liabilities is RM 113.9 million & had reported to have RM 605.7 million. Thus, its gearing ratio is 18.88% presently. At that time, MYEG has reported to have RM 438.6 million in current assets and RM 266.1 million in current liabilities. As such, it has a current ratio of 1.65.


  • Regional Expansion 1: The Philippines
    It owns 40% of i-Pay MYEG Philippines Inc. (MYEG Philippines) where it offers a wide range of services for the following government agencies:

    – National Bureau of Investigation.
    – Philippine Overseas Employment Administration Agency.
    – Quezon City Local Government Unit.
    – Cagayan Economic Zone Activity.
    – Land Bank of the Philippines.

    In addition, it creates additional income streams by upselling a range of insurance products and fees from leasing both hardware & software.


  • Regional Expansion 2: Indonesia
    In September 2018, MYEG had incorporated 90%-owned subsidiary, PT MYEG Services Indonesia and subsequently has signed a Memorandum of Understanding (MoU) to invest US$ 10 million for 40% shareholdings in PT Cartenz Technology Indonesia, which is an e-government services provider in Indonesia. Currently, MYEG through PT Cartenz had already installed 5,000 tax monitoring system installations In Indonesia. It plans to increase the number to 1 million over the next few years.


  • Regional Expansion 3: Bangladesh
    In August 2018, MYEG through MYEG (Bangladesh) Sdn Bhd has signed a Joint Venture Agreement with Control Data (BD) Ltd and My Paycheck Sdn Bhd to provide technology & e-government services in Bangladesh.


  • Major Shareholders
    As of 2 January 2019, MYEG’s five biggest shareholders and their direct shareholdings are as follows:

Major ShareholdersDirect Shareholdings (%)
Asia Internet Holdings Sdn Bhd (AIH)29.71%
Wong Thean Soon7.69%
Employees Provident Fund Board3.15%
Kumpulan Wang Persaraan (Diperbadankan) 2.05%
SSBT Fund FBC1 Baron Emerging Markets Fund1.89%



Dato’ Dr. Norraesah binti Haji Mohamad and Wong Thean Soon are key shareholders of MYEG with their interests in AIH. Dato’ Dr. Norraesah is appointed as the Executive Chairman and Wong is appointed as MYEG’s Group Managing Director.


  • P/E Ratio
    As of 14 October 2019, MYEG is trading at RM 1.45 a share. Thus, it has a current P/E Ratio of 21.84, based on adjusted latest 12-months EPS of 6.64 sen. It is below its 10-Year Average of 29.69.


  • P/B Ratio
    As of 30 June 2019, MYEG has net assets of 16.80 sen a share. Hence, it has a current P/B Ratio of 8.63, above its 10-Year Average of 8.12.


  • Dividend Yields
    Over the past 12 months, MYEG had paid out 1.90 sen in dividends per share (DPS). Thus, its dividend yield is 1.31% per annum, below the FD rate of 3%-4% offered by local banks in Malaysia and below its 10-Year Average of 1.53% per annum.


VIA’s Verdict 

Excluding one-off impairment losses due to the abolishment of GST, MYEG had delivered growth in revenues, earnings, and dividends to its shareholders. Over the next few years, MYEG would focus on regional markets for future growth. It is currently trading at below average P/E Ratio and is offering 1.31% per annum in dividend yields.

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