MyEG Optimistic On e-Government Concession Renewal

Maybank IB had a recent meeting with the MyEG management team on the group’s outlook for the year, the meeting went well, and more importantly, the management affirmed views on the group’s upbeat outlook.

With the bulk of its revenue derived from the e-government contract, the concerns were on its current e-government service concessions which are slated to expire in May 2023, with the last extension received in May 2020 for 3 years. On this note, the management is fairly optimistic that they could obtain another 3-year extension on the basis of their long track record as the leading IT service provider for the government.

Apart from the MoU with Mimos Technology Solutions S/B to develop the national blockchain infrastructure, we understand that MyEG has also managed to onboard three banks for the pilot test of its supply chain financing solutions through the Zetrix platform. On the China side, the traction on digital Yuan utility has been rather gradual, with a cumulative circulation of digital Yuan hitting CNY13.6b, or 0.13% of total Yuan in circulation as at end-2022, according to the country’s central bank.

Maybank IB believes the adoption of this digital currency could rise further in the future, given its greater efficiency, low cost, and traceability attribute vis-à-vis traditional money. This could drive revenue growth for MyEG, where the research house has already penciled in 4/11% of MyEG’s revenue in FY23/24E to come from this business, mostly through the sale of Zetrix tokens.

During the meeting, MyEG said it is also planning to distribute its entire 25.8% stake (84m shares) in Agmo Holdings Bhd (AGMO MK, Not Rated, CP MYR0.735) as dividend-in specie in two tranches (69.75m shares in Feb 2023, 14.25m shares in Aug 2023). This would provide exposure to Agmo’s digital solutions businesses and also supplement the projected FY23E DPS of 1.5 sen, based on c.30% payout ratio assumption.

Maybank IB sees this as a way for MyEG to preserve its capital to fund the development of its new businesses, whilst enhancing shareholders’ returns through dividends.

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