MYEG - the best yet to come

by **Cals** Tue 17 Sep 2013, 03:15

Published: Saturday September 14, 2013 MYT 12:00:00 AM
Updated: Saturday September 14, 2013 MYT 11:59:21 AM
MYEG - the best yet to come
BY TEE LIN SAY
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At RM1.92, MYEG is up a staggering 143.04% on a year to date basis, and now has a market capitalisation of RM1.13bil.

THE rise of MY E.G. Services Bhd (MYEG) shares has been nothing short of phenomenal.
It’s more than doubled in the last one year on the back of continued earnings enhancement, as the company continues to entrench its position as the unchallenged e-government services provider.
At RM1.92, it’s up a staggering 143.04% on a year to date basis, and now has a market capitalisation of RM1.13bil.
For its year ended June 30, 2013, net earnings hit RM35mil, not bad considering some five years ago in 2009, it was recording earnings of RM17mil.
This would mean that it has grown at a compounded annual rate of some 15% over the last five years.
So now, at a price earnings of 32.54 times, what else is there to look forward to?
Well, MYEG managing director TS Wong thinks that the best is yet to come.
“Shareholders can look forward to more innovative products and services from MYEG as well as expansion of its business beyond local shores.
“We think the opportunity is there right now to establish ourselves as a leading international player in machine to machine (M2M) solutions and the myriad of solutions possible is limited only by our own imagination.
“The Malaysian market is the platform to show that our solutions work and benefits the stakeholders.
“MyEG has been constantly reinventing ourselves over the last 10 years and we are about to embark on our most ambitious and potentially rewarding transformation to date,” he says in an email interview.
Certainly, MYEG has bagged a fair number of contracts this year.
The latest was the MOU it entered into with Celcom Axiata Bhd to jointly explore possible business opportunities and collaboration in the areas of e-Government services delivery and joint go-to-market for specific target market segments.
The MOU is valid for a period of one year, and can be further extended subject to mutual agreement between Celcom and MYEG.
Wong says that in general, MyEG shares several areas of synergistic collaboration with telecommunication companies.
“As MyEG provides mass market services to a few industry verticals including the financial, the automotive, foreign employment and soon food & beverage industries, we are looking at cross marketing each other’s products within these industry verticals,” he said.
“Further down the road, we are looking at further developing our suite of M2Msolutions. If Web 1.0 was all about e-commerce and Web 2.0 was social media, we believe that Web 3.0 could possibly be the ‘Internet of Things’,”
“Devices will become smart devices and have real time Internet connectivity to enhance their capabilities. We already have two industry wide solutions in this space ready to be launched next year and we want to be a leading global player in this space.
“Due to the requirement for real time Internet connectivity, telcos would invariably be a key partner for developments in this space.
“Unfortunately I cannot elaborate on what are the two M2M solutions to be launched next year,” he says.
M2M solutions certainly do not come cheap.
In general, it requires significant capex investment due to the involvement of hardware.
“The capex investment in turn depends on the schedule of the service roll-out.
“Based on a blue sky scenario where both our M2M services are deployed to the widest scope possible, we could be investing between RM500mil to RM1bil to roll out the services,” says Wong.
M2M aside, Wong says that a gap in the market where MYEG could likely serve presently would be in the reduction of accidents, especially those involving heavy vehicles.
“Accidents involving lorries and buses are unfortunately happening too frequently and we think that more can be done to help reduce the number of incidents.
“Accidents cannot be totally prevented of course, but with the right data at the right time, we believe that accidents due to chronic reckless driving and poor vehicle condition can be reduced,” says Wong.
He says it is MYEG’s aim to launch 2 major new services annually.
As it is, approximately 12 million Malaysians have directly or indirectly used MYEG’s services thus far, and Wong believes this can be expanded further to 20 million users.
“From next year onwards, we will start exploring opportunities to export our solutions to foreign countries,” he said.
To reach out to these potential customers, Wong says that a multiple prong approach will be used.
This includes cross marketing with selected business partners as well as providing greater value add for each service.
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Wong: ‘We think the opportunity is there right now to establish ourselves as a leading international player in machine to machine (M2M) solutions and the myriad of solutions possible is limited only by our own
imagination.’
At the same time, MYEG will continue investing in its own marketing programmes.
Wong adds that revenue from cross marketing can start almost immediately, while revenue from M2Msolutions hopefully from next year onwards.
Earlier this year, MYEG launched the ‘foreign workers working permit renewal’ or FWWPR earlier this year when the company said it was targeting the three key sectors of construction, plantation and services.
The transaction fee is around RM50 per FWWPR.
With 3.5 million foreign workers, the potential market size for this service is around RM175mil annually.
“We have been very encouraged by the take up rate for the foreign worker renewal service even though we have only started offering it for less than six months.
“It is obvious that there is demand for a more efficient way to renew these permits.
“It has already started contributing to our income and it will be a significant percentage of our income moving forward,” he says.
Apart from that, MyEG has been chosen as the sole manager of the Bantuan Lesen 1Malaysia (BL1M) programme, a government initiative to encourage motorcyclists to be licensed.
Under the BL1M programme that was launched on Jan 31, motorcyclists will only have to pay RM199 for their licence.
The fee includes the licence application fee and photograph, driving lessons, and the theory and practical tests at Road Transport Department (RTD)-approved driving institutes.
It certainly appears that the earnings momentum of MyEG isn’t close to plateauing anytime soon.