PETALING JAYA: My E.G. Services (MyEG) Bhd’s risk-reward appears attractive as its immigration and healthcare segments stand to benefit from the reopening of international borders, says Maybank Investment Bank Research.

       Moreover, the research house believed the market had underestimated the potential earnings growth from its decentralised finance (DeFi) segment, which is gaining traction.As of April 1, the Human Resource Minister has received about 470,000 applications for foreign workers representing more than 40% of the 1.1 million registered foreign workers in 2021, according to the research report.

       Additionally, travellers excluding those from Singapore are required to undergo Covid-19 testing within 24 hours of arrival. This can be done either through MyEG’s breathalyser or using a professionally-administered antigen rapid test kit.

       The research house noted MyEG charges RM70 for Malaysians and RM100 for foreigners per breath test. Due to its rapid and accurate detection, research house said MyEG’s breath test could be the ideal option.

       “We believe this could be more than enough to offset revenue decline from its quarantine business,” it said in the research report.

       According to the research house, the digital yuan adoption is rapidly gaining traction, with the pilot programme being rolled out to more cities in China, currently at 17 cities and payment service providers such as UnionPay incorporating digital yuan as a payment option in its platform for merchants and users. “With greater adoption by the Chinese merchants, supply chain financing and traceability in the trades between Malaysia and China could be the most immediate viable application for MyEG’s Zetrix,” it said. “MyEG stands to benefit from the growth in transaction activities through the platform,” it added.

       MyEG’s balance sheet swung from a net cash of RM230mil at the end of third quarter of its financial year 2021 to a net debt of RM71mil at the end of the final quarter of the same financial year.

       This is due to the elevated capital expenditure for its DeFi segment, breath test equipment, as well as the hardware for its Road Transport Department (JPJ) e-testing project, according to the research house.

       It has booked in a marginal revenue contribution of 2% to 8% from DeFi for financial years 2022 to 2024.

       However, the research house has yet to incorporate any incremental growth from the JPJ e-testing project, which is still in pilot stage.

       “If it materialises, this could provide further upside to our estimates,” it added.

       The research house has maintained its “buy” call on the company with a target price of RM1.47. The downside risks are the weaker-than-expected earnings and margin delivery, stiff competition in the e-government services space, weak domestic economy and the prolonged closure of borders that would be a drag on its immigration business.