MYEG – Fundamental Analysis (5 Sep 2015)

MYEG Analysis:-

Excel – http://1drv.ms/1NhH1LH

My View:-

  • Valuation:
    • 5Y DCF:
      • Good Scenario (20.0% – 22.0%): From 3.09 to 3.30 (Uncertainty Risk: LOW to MEDIUM)
      • Base Scenario (17.0% – 19.0%): From 2.80 to 3.00 (Uncertainty Risk: MEDIUM)
      • Bad Scenario (14.0% – 16.0%): From 2.54 to 2.71 (Uncertainty Risk: HIGH)
      • Ugly Scenario (10.0% – 12.0%): From 2.22 to 2.37 (Uncertainty Risk: VERY HIGH)
      • At current price (2.58), based on RDCF, assumption of FCFF growth rate in the next 5 years is 14.5%.
    • Absolute EY%:
      • Trailing:
        • FY15 (EPS: 0.057) – 1.761 (Uncertainty Risk: EXTREME)
        • R4Q (EPS: 0.079) – 2.446 (Uncertainty Risk: VERY HIGH)
      • Forward:
        • FY16 (EPS: 0.054 ± 5%) – From 1.573 to 1.738 (Uncertainty Risk: EXTREME)
        • FY17 (EPS: 0.055 ± 5%) – From 1.606 to 1.775 (Uncertainty Risk: EXTREME)
      • EPS applied to reach the current stock price (2.58): 0.083
  • In my opinion, the valuation of MYEG is less attractive at this moment.
  • 3 Mar 2015 – The adoption of foreign worker permit renewal since the announcement of the closure of the immigration department counters in January 2015 has risen significantly to 60,000 transactions per month from 10,000 per month in December 2014. Permanent car ownership transfer transactions rose to 1500 per day in December 2014 compared to 300 per day a year ago. This further reinforces that commercial e-government services have a much faster adoption rate since each user utilises the service in their daily business transactions.​
    • 2 Jun 2015 – FWP is still not reaching its full potential yet. Although FWP now contributes close to 20% of the top line, we still believe it has yet to reach its full potential, given the immigration counters were only closed in early May. Transaction volume for FWP is expected to continue improving in the coming quarters, and OP margin should also improve due to operating leverage. MER is expecting earnings to triple by FY16, mainly driven by the FWP services.
  • 2 Jun 2015 – Still preparing for the GST EMS system. Total investment for the GST EMS system has increased to RM74mn, as management is building up capacity in anticipation that the government will give the go ahead to install 50k units by year-end in Sept. Contribution from this would be insignificant, but the results will be used by the government to determine the effectiveness of the program, before deciding on the 500k units for phase-II.
  • This is a no-brainer business and fully blessed by our beloved Government.

Latest Financial – Q4 2015 Financial Report (28 Aug 2015) http://www.bursamalaysia.com/market/listed-companies/company-announcements/4852621

At the time of writing, my family member owned shares of MYEG.

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