MyEG Services Bhd has come out tops for the highest return on equity (ROE) over three years among companies with a market capitalisation of more than RM1 billion in the technology sector.
The e-government services provider reported an ROE of 18.4% in 2018, which doubled to 37.9% a year later but tapered off to 28.9% in 2020, based on annualised earnings. Nonetheless, this translates into a three-year weighted ROE of 29.5% for the three years in review — the highest among its big-cap peers.
MyEG had changed its financial year end twice between 2018 and 2019. In June 2018, it was changed from June 30 to Sept 30. Consequently, the financial period of 2018 (FP2018) was made up of results for 15 months, from July 1, 2017, to Sept 30, 2018.
On Sept 27, 2019, MyEG again changed its financial year end, from Sept 30 to Dec 31. FP2019 was also made up of results for 15 months, from Oct 1, 2018, to Dec 31, 2019.
The company posted a net profit of RM128.95 million for FP2018, down from RM201.5 million the year before. Its earnings growth gathered steam in FP2019, delivering a net profit of RM303.09 million on revenue of RM593.57 million. In the financial year ended Dec 31, 2020 (FY2020), it achieved a lower net profit of RM268.6 million after its revenue fell to RM530.4 million.
MyEG was listed on Mesdaq on Jan 16, 2007, raising RM14 million in proceeds. Over the next decade, it became the country’s leading e-government services company and provided a wide range of government and commercial services, with its market capitalisation testing the RM8 billion band. Apart from Malaysia, it has also established a foothold in the Philippines, Indonesia and Bangladesh.
The company has remained resilient despite the ups and downs on the economic and political front. It has consistently reported a profit since its initial public offering, undeterred by the pandemic or any other calamity that has battered many other companies.
Among others, MyEG handles online payments for various government services such as the renewal of road tax for vehicles, foreign worker permits and, more recently, health screening and quarantine management as well as the supply of machines such as road tax and insurance kiosks, foreign worker insurance and vehicle financing and trading.
As the company itself says in its annual report for FY2020, “In essence, MyEG is a key proponent within the government’s digital agenda.”
And it appears that MyEG is likely to maintain its strong performance in the current year. While many companies are grappling with the effects of Covid-19, it registered a net profit of RM156.97 million on revenue of RM333.19 million for the six months ended June 30, 2021 (1HFY2021).
If the first six months’ financials are taken as a yardstick, MyEG is likely to post a record profit and turnover in FY2021. In 1HFY2021, MyEG’s net cash from its operations stood at RM275.63 million, after taking into account long-term debt of RM107.5 million.
Retained profits were RM727.16 million at end-June.
On its prospects, MyEG says, “The Covid-19 pandemic has adversely impacted economies around the world and Malaysia has not been spared. Although this pandemic is ongoing, we are optimistic that our business will remain resilient while we remain vigilant for new opportunities.
“For instance, during these trying times, we continue to introduce innovative online services such as our Covid-19 health screening service as well as new concession services such as the online renewal of motorcycle insurance and road tax and online renewal of competent driving licence for the convenience of Malaysians.”
Meanwhile, MyEG has a 10% stake in S5 Systems Sdn Bhd, which is currently undertaking a reverse takeover of Ancom Logistics Bhd.
Some analysts expect its holding in S5 Systems to be a fresh growth catalyst for MyEG to take part in more e-government projects.