IT-related services counters such as My EG were among the top gainers
KUALA LUMPUR: CIMB Equities Research is retaining its target price of RM3.14 for MY EG Services which is 72.5% above the last traded price of RM1.82.
It said on Thursday that it was maintaining its earnings per share (EPS) forecast and target price, based on an unchanged 25.2 times 2018 price-to-earnings (P/E), a 20% premium over its 21 times P/E target for the technology sector.
“The premium is justified by its 53.6% 3-year EPS CAGR (FY17-19F). A successful launch of the GST monitoring project and this Philippines venture are potential re-rating catalysts.
Risks include weak registration of illegal foreign workers (IFWs),” it said.
On Wednesday, MyEG announced it had signed a JV agreement with I-Pay Commerce Ventures (IPCV) to provide electronic government services in the Philippines and other related services, including electronic payment services.
IPCV is a payment processing services provider and a direct agent of Western Union in the country. MyEG will hold 40% of the new JV while IPCV will hold the rest.
IPCV is backed by renowned investors like IP Ventures (leading technology and retail conglomerate in the Philippines), Kaikaku Fund (Softbank affiliated fund), JJ Atenco (founder of 899 Holdings Inc.) and Derrick Chiongbian.
IPCV owns two concessions, providing services to the National Bureau of Investigation of Philippines (NBI) and Philippines Overseas Employment Agency (POEA).
CIMB Research said the JV comes with ongoing concessions with two agencies: 1) the National Bureau of Investigation of Philippines (NBI) – the service allows users to obtain a police clearance certificate, a requirement when applying for new jobs; and 2) Philippines Overseas Employment Agency (POEA) – the service enables users to obtain certification, allowing them to work overseas.
“This news is a positive surprise to us as it is MyEG‘s first successful overseas venture, an indication of how MYEG is entering other markets via partnerships with local companies.
“We believe MyEG can help the business grow further as it has developed the infrastructure required to set up electronic government services over the past 10 years. Partnering with MyEG will help the companies reduce their start-up costs considerably, in our view.
“While the announcement did not highlight any profit and loss figures from the two concessions, we have assumed the revenues generated are from a low base.
“With MyEG’s infrastructure support, we believe the revenues from these two concessions should pick up rapidly over the next few quarters. MyEG will invest US$2mil for its 40% stake in the new JV,” it said.
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