In a note today, MIDF Research said if NIISe was cancelled by the government, it will be a “positive development for MyEG”.
The research house maintained its “buy” call on the stock and is expecting continued success for the group.
Last Saturday, home minister Saifuddin Nasution Ismail revealed the government was in the process of deciding whether to scrap the NIISe that has been delayed in its development.
“The uncertainty of the NIISe project is unlikely to impede MyEG’s ability to secure another three-year extension for their (immigration) e-government concession in May 2023.
“This is due to MyEG’s impressive track record, and would only affect them in the long run. Thus, the risk of immigration removal has been factored into this call,” MIDF Research said.
NIISe had cast a dark cloud on MyEG’s prospects early last month. Its share price crashed 26.7%, to 70 sen on Feb 7 following an announcement by immigration director-general Khairul Dzaimee Daud that all immigration services would be fully back under government management by 2025.
The implication from the announcement was that MyEG would lose its revenues from providing immigration-related services.
“If the immigration services are transferred back to the immigration department, we expect that it could result in a long-term 20% decrease in MyEG’s earnings,” MIDF Research said.
NIISe’s fate hangs in the balance
The NIISe project has been met with flak recently regarding its slow progress, with completion at around 10% as of March, according to media reports.
Iris Corp Bhd was awarded the NIISe project in March 2021, with a deadline of August 2024 to deliver the project.
“So far, they have not even achieved the supposed level of the project, which cost almost RM1.2bil,” Saifuddin said.
The Cabinet has given the home ministry until next month to submit a memo on the project. Saifuddin said the government had yet to decide whether or not to continue the project.
“At the moment, the ministry and I are managing this matter. I don’t want to speculate and make any assumptions because this matter needs (further) research,” he said.
“Of course, a large-scale project has several parameters before deciding whether to continue or cancel it,” he said.
Good news for MyEG?
Regardless of the government’s decision on NIISe, MIDF Research is confident MyEG will at least be able to secure a concession agreement for the next three years.
Should NIISe be cancelled, it would simply be the cherry on top of the cake for MyEG and possibly ensure more security for the group’s long-term earnings.
MyEG reported core earnings of RM341.3 million in FY2022, which were in line with MIDF’s expectations. The core earnings accounted for 96.3% and 93% of MIDF’s and the consensus full-year estimates respectively.
“The (maintained) price target (of RM1) is derived based on a FY2023 earnings per share (EPS) of 5.4 sen against price-earnings ratio (PER) of 19 times,” said MIDF Research.
The research house continues to like MyEG for its initiatives into blockchain solutions, which they expect will support mid-to-long-term growth, in addition to organic expansion from existing business segments.
MyEG’s share price closed at 78 sen today, a rise of 4 sen or 5.4%, giving it a market capitalisation of RM5.76 billion.