MY EG Services Berhad

Transcription

1 3Q FY June 2012 results MY EG Services Berhad 29 May 2012 Customs tax monitoring scheme to launch in Jan 2013 JPJ-related services continue to drive growth Vehicle ownership transfer service to launch mid-2013 Maintain Buy for growth prospects, potential wildcards Price RM0.585 BUY Market capitalization RM352 million Board Main Sector Trading & Services Key stock statistics FYJun11 FYJun12E EPS (sen) P/E (x) DPS (sen) Book value /share (RM) Issued capital (mil) (10 sen par) 52-week price range (RM) Major shareholders (%) Asia Internet Holdings 34.8% Lembaga Tabung Haji 5.0% Share Price Chart Stock code By The Research Team - 3-Jan May-12

2 9-month FY June 2012 results highlights Year end June (RM mil) 9m-FY12 9m-FY11 % chg Turnover Pre-tax profit Tax (0.08) (0.1) (17.6) Minority interests Net profit EPS (sen) Pre-tax profit margin (%) Net profit margin (%) MyEG Services results for 3Q FY June 2012 were within expectations. Net profit of RM19.3 million for the first nine months of FY12 accounted for 70% of our full year forecast of RM27.8 million. Revenue for the quarter rose 17.7% year-on-year to RM18.3 million, driven primarily by higher volumes for its motor insurance and road tax renewal services, as well as new cloud computing based services. Net profit for the quarter rose 14.6% to RM7.2 million. The company continues to enjoy largely tax-free status with minimal taxes paid. For the first nine months of FY12, revenue increased 20.8% to RM49.5 million, while net profit rose 29.4% to RM19.3 million. Despite investments in new branches, kiosks and capex in the customs monitoring and other new planned services, the company s balance sheet remained strong. As at end-march 2012, it had net cash of RM7.6 million, down slightly from RM8.7 million at end This excludes some RM2.4 million in hire purchase liabilities. 2

3 Outlook and recommendation We maintain our BUY recommendation and earnings forecast. We continue to like MyEG s business model, defensive qualities and ample scope for earnings growth through new business opportunities and services. We expect net profit for the full year (FY June 2012) to rise 26% to RM27.8 million, with no contribution yet from the customs tax service, which has completed its pilot trial. The service will start in Jan Assuming contributions of RM5 from this service in FY13, we expect net profit to rise 37.3% to RM38.1 million, with EPS of 4.6 sen and 6.3 sen, respectively. MyEG s shares have fallen from 69.5 sen to 58.5 sen over the past three months, as smaller capitalized stocks have been badly bruised by the broader market sell-off triggered by the Eurozone worries. At the current price of 58.5 sen, MyEG is are trading at P/E multiples of 12.7 and 9.2 times for FY12-13, which are attractive relative to its double-digit earnings growth and potential wildcards from the customs tax monitoring service, immigration and other new services. The company s earnings are poised to grow rapidly in the next few years, driven by continued growth for its road tax renewal service, new products and services, as well as increasing market share and customer acceptance. The underlying market for MyEG s range of services is large, with relatively resilient and recurring demand, supported by the growing popularity of online services and transactions. JPJ-related services In the near term, MyEG s earnings will continue to be driven by its JPJ related (Road Transport Dept) services, namely for road tax renewal and insurance premiums. These are supported by a large number of vehicles and drivers and high transactional frequency. Despite strong growth over the last few years, market for MyEG s JPJ-related services has yet to reach saturation point as more consumers transact online. The company is planning new JPJ services that will spur further growth, including an online vehicle registration transfer service. We understand the road tax renewal service currently attracts about 10,000 renewals per day, up from 9,000 in the first quarter of 2012 and 8,000 late last year. In 2011, it saw a steady increase in renewals, from around 5,000 per day in 1Q2011 to 6,000 in 2Q2011 to 8,000 by the year end. 3

4 Meanwhile, the motor insurance service continues to grow, and currently attracts about premiums underwritten daily, up from premiums three months ago. In Dec 2011, MyEG launched the first phase of its online Vehicle Ownership Transfer service, which allows for easier transfer of ownership. E-Tukar Hakmilik Sementara aims to solve issues, especially relating to assumption of liabilities and summons, concerning the transfer of ownership during the time when the vehicle is sold to a used-car dealer. For a fee of RM10, the new service allows car sellers to transfer their ownership to car dealers on a temporary basis for six months. The company is following up with the introduction of a full online vehicle ownership transfer system, which will cover all sale and registration of vehicles and not just temporary transfers. The service is tentatively scheduled to be launched in June 2013 and would cover a potential market of around one million transfers annually. Immigration services The immigration services will be another major driver of growth going forward, although the division is seeing slow business for the moment due to ongoing labour and immigration issues locally. Launched since April 2010, this involves the online renewal of foreign workers permits. At present, the service caters for domestic maids, but will be extended to cover other foreign workers at a later stage. Growth of the services has been hampered by the freeze in Indonesian and Cambodian maids, and the government s ongoing registration exercise of illegal workers. The foreign worker renewal service will be marketed more aggressively once the registration of illegal workers exercise is concluded. By then, there will be an estimated market size of around 4 million permits per year. Customs monitoring service MyEG has completed the pilot project for the government and plans live commencement of the scheme on Jan 1, The scheme will initially commence for category C and D businesses namely restaurants and entertainment outlets. The potential market is large. We understand the service tax base was about RM4 billion in 2010, of which about RM2 billion are for category C and D businesses (restaurants and entertainment outlets), while the remaining RM2 billion is from professional services as well as gaming. 4

5 Under the customs tax monitoring scheme, MyEG has a 40% stake in a special purpose vehicle (SPV) that will link up point-of-sales (POS) terminals of businesses that are subject to customs service taxes, such as restaurants and entertainment outlets. The SPV will undertake the program and install a software at each POS terminal for the link up at its cost. In return, the SPV will receive a 20% share of the taxes that were previously found to be under-declared, with 80% going to the government, with a base growth imputed. This could boost earnings from FY June 2013 onwards, although capex is also high at RM100 million for Phase 1. However, the quantum is difficult to assess at this juncture, as much depends on how much tax was underdeclared in the first place. We have not assumed any profit from this venture in FY12, with contribution to MyEG of RM5 million in FY13. It is worth noting that MyEG s customs tax monitoring service is compatible with a GST regime that is widely expected to be implemented at a later stage. This will give the company a potentially wider earnings base, if it is given the rights to administer the system. Profit & Loss Analysis Year end June (RM mil) E 2013E Turnover Operating profit Depreciation (5.2) (7.2) (7.5) (8.0) Interest income/(exp) (0.4) (0.5) (0.1) 0.3 Associates 5.0 Pre-tax profit Tax (0.2) (0.8) (0.2) (0.2) Minority interests 0.0 (0.1) (0.1) (0.1) Net profit Operating margin (%) Pre-tax margin (%) Net margin (%) Effective tax rate (%)

6 Per Share Data Year end June E 2013E EPS (sen) P/E (x) Dividend (sen) Net yield (%) Payout ratio (%) NTA (RM) Price/ NTA (x) Cashflow/share (sen) Price/Cashflow (x) Gearing (%) net cash 5.2 Net cash net cash ROE (%)