KUALA LUMPUR: There are mixed views from analysts on the stock valuation of MyEG Services Bhd, following a recent news report which said that by 2025, all immigration-related affairs including those now being managed by third parties such as MyEG will be reverted to the Immigration Department.
Besides passport renewals and visa applications, these immigration-related affairs will also include applications and renewals of foreign worker permits and maid permits.
According to the news report, the return of these services to the department will take place when it rolls out its National Integrated Immigration System (NIISe), which will converge all immigration transactions.
Yesterday, MyEG’s stock price plunged from last Friday’s closing of 95.5 sen to gap down 30 sen, or 31.41%, to hit limit down at 65.5 sen in early trade before recovering to close at 70 sen.
Meanwhile, Bursa Malaysia also suspended the short selling of MyEG shares on Tuesday under proprietary day trading (PDT) and intraday short selling (IDSS).
“The short selling under PDT and IDSS will only be activated on Wednesday, at 8.30AM,” said the market operator in a bourse filing.
Also, trading in MyEG’s shares and structured warrants was halted for an hour (from 2.44PM until 3.44PM) yesterday.
In filing with Bursa Malaysia yesterday, MyEG said the group had not held any meetings with either the Home Affairs Ministry or the Immigration Department regarding the intention to converge all immigration transactions under the NIISe.
Rakuten Trade head of equity sales Vincent Lau said the MyEG stock sell-off was not an unusual knee-jerk reaction from investors, given the negative news.
“More clarity is needed from the management of MyEG,” he told StarBiz.
Iris Corp
Bhd’s share price, meanwhile, jumped on Tuesday. Lau said there might be speculation that the group may be a beneficiary of policy changes.
In a report, MIDF Research said this policy change will negatively impact third-party entities like MyEG which currently handles these services in the long run.
“MyEG is likely to lose around 20% of its long-term net income after 2025, if the immigration services are transferred back to the Immigration Department as planned,” said the research unit.
However, it noted that in contrast, if the Immigration Department is unable to deploy the NIISe by 2025, this will provide a better outlook for MyEG as it will prolong the schedule for foreign worker work permit renewal services to return to the Immigration Department.
MIDF Research has maintained its “buy” call on MyEG, with a lower target price of RM1 (from RM1.23 previously) to account for the elevated policy risks which are likely to deter investors.
This is especially considering the significant contribution of immigration-related services to the group’s revenue.
Still, the research pointed out that MyEG’s stable earnings forecast for 2022 and 2023, steady sales from its road transport businesses, and potential new business opportunities from the NIISe and initiatives such as the Road Transport Department’s e-testing system and blockchain projects could support its share price.
In a report, UOB Kay Hian (UOBKH) Research said it believes that MyEG would still have an important role in immigration-related services.
“We deem that MyEG will not be impeded from providing its current ancillary immigration services such as foreign worker insurance, job matching, accommodation or other bundle services such as doorstep delivery that the Immigration Department is not providing.
“Our view is that NIISe will serve as a government-related portal similar to the current MyIMMs portal, and will not be commercialised to upsell other ancillary products.
“We also understand that the current portal is not well-utilised,” said the research unit.
On the potential earnings downside following the Immigration Department’s move, UOBKH Research said the impact on MyEG is manageable.
The research unit noted that MyEG’s portal currently provides foreign worker (including maids) working permit renewal services, alongside the upselling of other ancillary products.
“If foreign worker renewal services are fully back under the Immigration Department’s control by 2025, the earnings impact to MyEG is about RM35 (inclusive of delivery fees) of processing fees per pax.
“This translates to about 5% in revenue downside for MyEG,” said UOBKH Research.
The research unit added that MyEG has potential catalysts such as listings and subsequent share distributions of successfully incubated (investee) technology companies through 2025, the launching of the Zetrix blockchain which facilities regional trades with China, the possible clinching of new government contracts (such as e-visa and goods and services tax or GST software) and e-testing module for car driving licences.
UOBKH Research also noted that MyEG had started the proof of concept for the automated driving test and training system (Road Transport Department’s e-testing) in November 2021, which could deliver RM50mil to RM60mil in annual profits on commercial rollout.
“However, given the delays in the launch (the latest guidance is March 2023 at the earliest), we conservatively forecast only modest contributions,” said the research unit.
UOBKH Research has maintained its “buy” call on MyEG with a RM1.30 target price, based on 25 times the 2022 estimated price-earnings (PE) and incorporates MyEG’s various investments such as Agmo Studios and S5 Systems.
“We advise accumulating the stock on potential irrational sell-downs.
“Valuations have also not priced in its potential role in the eventual revival of the government’s e-visa and GST initiatives,” said the research unit.
Conversely, Iris Corp’s stock price jumped from last Friday’s closing of 12.5 sen to close at 16 sen on Tuesday.
It should be noted that in late May 2022, Iris Corp stated that it had executed the NIISe contract with the Home Affairs Ministry for RM1.12bil.
The MSC-status technology innovator and leading provider of trusted identification products and solutions said the project involved the development, delivery and integration of the entire NIISe for the Immigration Department.
The deal was inked with Iris Corp’s wholly-owned subsidiary IRIS Information Technology Systems Sdn Bhd (IITS) on May 25, 2022.
IITS had received a letter of award for the NIISe project from the Home Affairs Ministry on Jan 29, 2021 at a contract period of 54 months from March 1, 2021 till Aug 31, 2025.
