MARC Ratings has affirmed its rating of AA-IS with a stable outlook on MY E.G. Services Berhad's (MYEG) Islamic Medium-Term Notes Programme of up to RM1.0 billion in nominal value.
The agency said the rating affirmation incorporates MYEG's well-established position as a concessionaire for e-government services, diversified revenue from non-concession businesses, high operating margin and healthy cash flow generation. Moderating the rating are the operational and cross-border risks associated with new business ventures and the potential challenges in increasing widespread adaptability of MYEG's blockchain platform for businesses.
MARC Ratings views positively MYEG's ability to leverage the well-established MYEG brand to diversify successfully into non-concession related businesses. The brand is associated with key e-government services, in particular, the renewal of driving licenses for Jabatan Pengangkutan Jalan and foreign worker permits for Jabatan Imigresen Malaysia. Operating under government concessions which are generally for three-year terms, MYEG's lengthy track record and established infrastructure mitigate renewal and termination risks. The rating agency notes that any impact on the group's credit profile from termination is considered low as contribution to group revenue accounted for only a modest 2% as at end-September 2024 (2023: 4%).
For 9M2024, group revenue rose by 31.0% y-o-y to RM723.4 million, largely due to the contribution from the sale of Zetrix digital assets and its services. Operating profit margin was very strong at 74.9% while pre-tax profit increased by 54.2% y-o-y to RM520.8 million. Cash flow from operations remained strong at RM640.5 million. Total borrowings rose to RM1.3 billion from RM846.7 million as at end-2023, with the increase to be utilised for working capital. Cash and bank balances of RM575.2 million would provide headroom for funding working capital.
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