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Thursday, June 20, 2013

MyEg (Target Price: 1.74) - Moving up the ladder (CIMB)

At our Asia Pacific Conference today, MyEG’s management unleashed a few positive surprises. We see this as a sign that the company is not resting on its laurels but is striving to move up the value chain. This is long-term positive for the company.

We raise our FY14-15 EPS forecasts by 6-14% to reflect higher fees for its foreign workers annual permit renewal services (FWWPAR). This increases our target price, which is still based on 18.7x CY14 P/E (20%
premium to our target market P/E). MyEG’s premium is backed by a solid 3-year EPS CAGR of 32%. Better-than-expected revenue growth and CSTM concession are the key catalysts. Maintain Outperform.

What Happened
Today, MyEG participated in our CIMB Annual Asia Pacific Conference. MyEG’s Managing Director, TS Wong presented in small group meetings. There were a few positive surprises, including 1) the probable year-end launch of new online services from the Road Transport Department (JPJ), such as the registration of new cars and bidding for new car number plates, 2) a higher fee of RM100 per worker for its FWWPAR (vs. our earlier assumption of RM50), 3) it has secured a new major contract from a plantation GLC company to handle the FWWPAR for its 40,000 foreign workers, and 4) the proposed launch of a new mobile payment system called “iPayEasy” in early-2014, riding on the custom service tax monitoring system (CSTM) infrastructure.

What We Think
The positive surprises indicate that MyEG's management is not resting on its laurels but is striving to move up
the ladder chain by providing new services to the market. This is long-term positive for the company.

What You Should Do
Remain invested in the stock. The stock is already up more than 80% this year and is one of our top
performing small-caps so far this year. However, its long-term growth prospects remain exciting with a
multitude of new services and projects in the pipeline. Our EPS forecast is conservative as we have yet
to impute potential earnings from CSTM, “iPayEasy” and the new JPJ services. Any EPS contribution from
these new projects over the next few quarters would be a bonus to our current EPS forecasts for MyEG.

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