MYEG: A Steady Growth Stock

Background

My E.G. Services Bhd ('MYEG') provides E-Services between the Government and the people and businesses. Its services include electronic delivery of driver and vehicle registrations, licensing and summons services and utility bill payments. In the past 5-6 quarters, its new business - online renewal of foreign worker permits - has grown into a major business, contributing a sharp rise in its revenue & profits.

other businesses like the replacement of MyKad (the chip-based national identity card), paying Road Transport and police summonses, auto insurance, and road tax renewal, - See more at: http://www.themalaymailonline.com/tech-gadgets/article/facing-backlash-myeg-defends-deal-with-malaysian-government#sthash.OAhaHM9X.dpu
Recent Financial Performance

Recent Financial Performance

Over the past 5 quarters, MYEG's top-line and bottom-line have risen steadily. Earnings grew at a 85% in the last 4 quarters!


Table: MYEG's last 14 quarters' P&L


Chart 1: MYEG's last 14 quarters' P&L

Financial Position

MYEG's financial position as at 31/3/2016 is deemed healthy with current ratio at 2.2x and total liability to equity at 0.6x.

Valuation

MYEG (closed at RM2.05 yesterday) is now trading at a trailing PER of 42x (based on last 4 quarters' EPS of 4.8 sen). Based on CAGR of 60% over the past 2 years, PEG ratio is still below 1. Thus MYEG valuation is deemed 'reasonable' for a growth stock.

Technical Outlook

MYEG has been in a steady uptrend since it broke above the resistance from the horizontal line at RM0.23-0.24.


Chart 2: MYEG's monthly chart as at May 30, 2016 (Source: ShareInvestor)

During this uptrend, MYEG had 3 prolonged consolidation phases. The first was Jan-Aug 2014 & the second one was Mar-Oct 2015. It is currently in the 3rd consolidation phase. The 2nd consolidation phase was supported by the 40-week EMA line. If the same applies to the current consolidation, we can expect the share price to be supported at RM1.90-2.00. Continuation of the long-term uptrend will begin if the share price surpasses the recent high of RM2.30-2.35.


Chart 3: MYEG's weekly chart as at May 30, 2016 (Source: ShareInvestor)

Conclusion

Based on good financial performance & condition, "reasonable" valuation (supported by rapid growth) and positive technical outlook, MYEG could be a good stock for long-term investment. Good entry is at RM1.90-2.00.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, MYEG.