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Tuesday, February 5, 2013

MyEG a top pick on revenue growth (STAR)

Outperform (maintained)
Target price: RM1.34

WE maintain our earnings per share (EPS) forecasts and target price, based on an unchanged 16 times 2014 price-to-earnings (P/E), a 20% premium over our 13.3 times target market P/E given its above-market three-year EPS compounded annual growth rate.

Higher-than-expected revenue growth from new services should catalyse the stock. MyEG is our top pick in the tech sector and also our top small-cap pick.

The stock remains an “outperform”.

Last week, MyEG had the soft launch of its new service, the “foreign workers working permit renewal” or FWWPR.

The company plans to first target three key sectors after the soft launch - construction, plantation and services.

Given the transaction fee of around RM50 per FWWPR, this service has great potential. With 3.5 million foreign workers, the potential market size for this service is around RM175mil annually.

As we factor in a conservative revenue figure of RM10mil from MyEG's FWWPR service in financial year 2014, there is potential to surprise on the upside.

The auto insurance renewal business is a fast-growing business for MyEG. The company is targeting RM150mil premiums in 2013.

MyEG is also looking to penetrate the RM1.5bil foreign workers insurance market.

Commission from foreign workers' insurance premium is around 20%, much higher than the 10% to 15% commission from auto insurance.

We have not assumed any earnings from foreign workers' insurance.

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