A leading digital service provider, MyEG Services Bhd stands out as one of the few public-listed companies whose earnings continued to grow during the Covid-19 lockdowns, as an increasing number of people embraced digital channels.

Last year, the Main Market company clinched The Edge Billion Ringgit Club (BRC) award for highest return on equity (ROE) over three years in the technology sector. This year, it bagged the BRC awards for highest ROE, as well as highest growth in profit after tax (PAT), over three years in the sector.

MyEG’s PAT, which stood at RM103.2 million for the 15 months of the financial period ended Sept 30, 2018 (its financial year end was changed from June 30 to Sept 30), climbed to RM303.09 million in the next 15 months ended Dec 31, 2019, as it changed its financial year end again, to Dec 31. For the BRC awards, these numbers were annualised for 2018 and 2019 to take into account the changes to financial year end.

Even as the pandemic struck, MyEG’s PAT grew from RM268.66 million in FY2020 ended Dec 31 to RM315.94 million in FY2021. Based on the BRC methodology, MyEG’s risk-weighted three-year PAT compound annual growth rate stood at a solid 45.2% — the highest among companies listed under the technology sector on Bursa Malaysia.

Its ROE had declined from 37.9% in 2019 to 23.4% in 2021 but, based on the awards methodology, its adjusted weighted ROE of 27.9% over three years is still the highest among its peers.

Having commenced operations in 2000 as the flagship e-government service provider, MyEG has since expanded its services to include a variety of commercial offerings in areas such as immigration, automotive, healthcare and financial services. Among its services are the renewal of vehicle road tax, foreign worker permits and the supply of digital infrastructure solutions and development.

Lately, the buzz around MyEG has been related to the potential of blockchain technology. Early last month, MyEG and Mimos Technology Solutions Sdn Bhd (MTS) agreed to team up to look into developing a national public blockchain. They plan to do this using MyEG’s blockchain platform, Zetrix, and Mimos blockchain technology as the components of the Malaysia BlockChain Technology, which is a key element of the government’s National Blockchain Roadmap launched on Aug 9.

Zetrix can provide multi-pronged revenue streams to fuel MyEG’s earnings growth, according to UOB Kay Hian Research. The research house says in an Oct 7 report: “Zetrix can generate earnings for MyEG via [an] initial coin offering (ICO), charging gas fees, service fees per credentials/contract for its verifiable credentials and e-signing services, and annual fees for its blockchain-based identifiers. We had previously assessed that Zetrix’s services could produce annual revenues of more than RM650 milion from these revenue streams, excluding ICO proceeds of RM210 million to RM420 million.”

UOB Kay Hian Research has listed MyEG as one of its top growth-stocks-at-a-reasonable-price picks. “MyEG is a standout in that earnings could well beat 2023/24 street expectations, should its blockchain platform Zetrix gain significant traction in facilitating cross-border trades with China, linked via China’s digital yuan platform,” it says in an Oct 11 report.

For the first half of FY2022, MyEG’s PAT rose 10.4% year on year to RM173.26 million, from RM156.97 million, even as revenue fell 2.9% y-o-y to RM323.56 million.

The group says it expects to continue introducing innovative services by leveraging new technologies in Malaysia as well as the countries in which it has a presence — the Philippines, Indonesia and Bangladesh — to drive organic growth.

It recently announced plans to raise up to RM1 billion through a sukuk wakalah perpetual programme to fund working capital requirements, capital expenditure and business expansion, among others.

At the time of writing, Bloomberg data showed that all nine analysts who tracked the stock had a “buy” call on it, with the average 12-month target price at RM1.20. The stock had shed 15.9% over a year to close at 88.5 sen on Oct 28, giving the company a market capitalisation of RM6.58 billion.