PETALING JAYA: MyEG Services Bhd’s revenue from its blockchain business is set to grow and compensate for the fall in its transportation revenue.
CGS International (CGSI) Research expects the technology company’s blockchain revenue to rise to RM143mil or 18% of total revenue in financial year 2024 (FY24) from 12% or RM90mil in FY23, which was mainly from the sales of its Zentrix token sales.
“We understand that management aims to issue about one million Zetrix tokens per quarter through the two exchanges that the token is listed on.
“Management also guided that the Malaysia-China ZTrade (a blockchain-based cross-border customs trade solution) could go live next month to coincide with the 50th anniversary of Malaysia-China diplomatic relations,” the research house stated.
In addition, the Philippines and Indonesia are looking to onboard MyEG’s Zentrix blockchain platform, it added.
The research house expected MyEG to post a revenue of RM816mil for FY24 and net profit of RM499mil or earnings per share of 6.7 sen.
CGSI Research anticipated MyEG’s development cost to fall to RM150mil in FY24 from RM460mil annually in FY22 and FY23, as the current blockchain platform reaches operational readiness.
It also projected MyEG’s immigration services segment to continue to benefit from vibrant foreign worker hiring activities this year.
Putrajaya had set the end of May as the deadline period for employers to bring in foreign workers in the formal sector, with the aim to reach some 2.5 million total registered workers by mid-year from 2.13 million as of February.
“This should expedite further sourcing of foreign workers by employers with a hiring quota, which we believe will benefit MyEG’s permit renewal and job matching businesses and cushion the ongoing decline in transportation segment revenue due to the digitalisation of the Road Transport Department services, which has dented MyEG’s legacy renewal services,” the research house stated.
CGSI Research maintained an “add” call on MyEG with a higher Gordon growth model-derived target price of RM1.15 a share and sustainable return on equity of 18.8% due to its attractive valuation (11.8 times FY24 price earnings multiple).
It of warned key risks to its call including the non-extension of MyEG’s current concession services, loss of market share in ancillary businesses and new blockchain solutions failing to materialise.
The upside rerating catalysts for MyEG include strong blockchain sales and the award of new concession services from both local and foreign governments, the research house added.
