CIMB Research ups MyEG target price to RM7.80
KUALA LUMPUR: CIMB Equities Research has raised the target price for MyEG Services from RM5.28 to RM7.80, after it was appointed by the government to compile and maintain database on the country’s foreign workers (both legal and illegal).
The database will come from employers of foreign workers that must use MyEG’s online foreign workers work permit renewal services (FWPR) from 2015 onwards.
“We bump up our EPS forecasts by 38%-63% to reflect higher earnings mainly from the FWPR. This raises our target price, which remains pegged to its peers’ 21 times CY16 price-to-earnings (P/E),” it said on Wednesday.
CIMB Research pointed out that a successful launch of the proposed customer service tax monitoring system (CTSM) project and the new developments in the FWPR are potential re-rating catalysts for the stock.
Starting this year, it is compulsory for all employers of foreign workers to use My’s FWPR. This would help the company to continuously update and maintain the database.
“Our earlier forecast was only 15%-20% market share for MyEG’s PR in FY15-16. The negative surprise was the later start of end-Feb 2015 for nationwide operation of Phase 1 of the CSTM project. We were earlier looking for CSTM to start in early Jan-2015.
MyEG indicated that it is working with the Immigration Department to compile a database of the country’s legal and illegal foreign workers.
Starting this year, all employers of foreign workers must use My’s online service to renew their annual work permits for the foreign workers. This will allow MyEG to update and maintain the database as FWPR enables the company to keep tabs on whether existing legal foreign workers renew their work permits or have already left the country.
In addition, the company will be able to monitor which employer uses legal or illegal foreign workers. A penalty will be imposed on employers that hire illegal foreign workers.
MyEG charges a transaction fee of RM38 per foreign worker for its online services. The company is also an independent insurance agent selling the compulsory insurance for the foreign workers.
On average, My’s total revenue per foreign worker is around RM100. We estimate that there are currently around 2.5 million foreign workers in the country.
“Our earlier forecast assumed only 15%-20% market share for My’s PR in FY15-16 compared to full take-up starting in January 2015.
“Remain invested in the stock. With earnings kicking in from the CSTM and FWPR, we forecast a strong three-year EPS CAGR of 71%.
“MyEG’s current valuation of 11.7 times 2016 P/E looks attractive and this does not include potential earnings from the proposed road safety diagnostic kit project (RSDS). We also note that the stock will go ex of its 1:1 bonus issue on 8 Jan (this Thursday),” it said.
Source: The Star