MY E.G. Services Bhd (MYEG), concessionaire for the previous government’s electronic applications, suffered a market capitalisation loss of nearly RM2.8 billion on the first day of trading after the shock results of the 14th general election.

Its losses were due to the sharp selldown on companies that are perceived to be linked to Barisan Nasional and Umno after Pakatan Harapan swept to power after the polls on May 9, said The Edge Markets daily. 

Adding to the selling pressure is that investors are concerned on possible loss of income when the new government removes the good and service tax (GST). 

Shares on the main market-listed MYEG was the third biggest loser on Bursa Malaysia this morning, and dropped 29.84% or 77 sen from its previous close of RM2.58.

As of 11.08am, MYEG was trading at RM1.81, the lowest in at least a year, and valued it at a market capitalisation of RM6.53 billion, according to Bloomberg data.

According to CIMB, MyEG’s GST monitoring project is at risk and “could be in trouble” especially since PH has pledged to remove the unpopular tax.

“Pakatan Harapan indicated in its (election) manifesto that it is looking to cut (abolish) GST in the first 100 days,” CIMB analyst Nigel Foo said in a note to clients this morning, and as reported by The Edge Markets.

“If GST is abolished, we believe there might not be a need for MyEG’s GSTM project.”

CIMB still estimates that MyEG’s earnings will be around RM250 million of net profit annually, assuming that it’s GST monitoring project does get cancelled. It’s earnings would mainly derive from foreign workers renewal permit services (FWPR) and sale of compulsory foreign workers insurance to employers.

“We believe MyEG’s existing services like online road tax renewal for cars and online FWPR services should continue even with Pakatan Harapan running the country. 

“This is because there are not many alternative services for renewing road tax for cars as well as FWPR,” CIMB said.

Following the stock downgrade, CIMB has also slashed MYEG’s 12-month target to RM1.86, from an earlier forecast of RM2.58, which implied a 27.9% downside. – May 14, 2018.