MYEG Services Berhad (MYEG) has posted strong financial results for 3QFY24, with a 42.0% year-on-year increase in normalised earnings, totalling RM170.2 million. Both research houses, MIDF Amanah Investment Bank Bhd (MIDF Research) and Maybank Investment Bank Bhd have maintained their BUY recommendation for MYEG, with a revised target price of RM1.14 and RM1.68 respectively, highlighting the company's attractive valuation and the continued strong performance of its decentralised finance (DeFi) segment.

The growth in MYEG's earnings was driven by the success of the Zetrix blockchain platform, which has supported a 27.8% year-on-year revenue increase to RM248.1 million. A large portion of this growth came from the sale of Zetrix tokens, despite a slight decline in average selling prices and forex challenges. The platform's other services, such as ZTrade, also contributed positively to MYEG's earnings.

MYEG's 3Q24 results exceeded both MIDF and consensus expectations, with cumulative earnings for 9MFY24 rising 46.9% year-on-year to RM491.6 million, surpassing 80% of full-year forecasts.

The company's DeFi projects continue to show promise, contributing to approximately 36% of the group's turnover in 3Q24. While the sale of Zetrix tokens remains the primary growth driver, MYEG's other DeFi ventures, including ZTrade and WorldCoin, have gained traction. These projects accounted for around 20% of the blockchain segment's turnover in the quarter, with ZTrade's applications doubling and WorldCoin's iris verification nearly tripling sequentially.

Maybank IB expects MYEG to continue selling 1 million Zetrix tokens per quarter through to mid-2025, when the token is anticipated to be included in MaiCapital's cryptocurrency ETF launch in Hong Kong.

Despite the positive results, both MIDF Research and Maybank IB caution that MYEG's dependency on government-linked services for a significant portion of its revenue exposes it to policy risks. This has contributed to a reduction in MIDF's target price. However, both analysts agree that MYEG's diverse DeFi ventures and blockchain applications provide a strong foundation for future growth. At RM0.88, MYEG offers an upside potential of 29.5%, according to MIDF, while Maybank IB's target price suggests a potential 91% return from the current level.

With a market capitalisation of RM6.6 billion and a solid pipeline of DeFi projects, MYEG remains well-positioned for continued growth, despite ongoing currency and policy challenges.