MARC Ratings is providing this update on MY E.G. Services Berhad (MYEG) following a news report that immigration-related services and processes will be directly undertaken in-house by Jabatan Imigresen Malaysia from 2025 onwards. Furthermore, changes to road tax and driving license requirements under the digitalisation process of Jabatan Pengangkutan Jalan have now been announced. As MYEG is a longstanding concessionaire for e-government services related to immigration and transport, among other businesses, the rating agency has assessed the potential impact on the group from these changes. MYEG currently has a RM1.0 billion Islamic Medium-Term Notes programme which carries a AA-IS/Stable rating from MARC Ratings.
As had been highlighted in MARC Ratings’ credit analysis report on MYEG dated November 16, 2022, the rating agency wishes to emphasise that MYEG’s concession revenue remains modest, standing at about 8% of total group revenue as at end-2021. This is expected to decline going forward and therefore will not materially affect the group if these concession agreements were to cease. The rating agency also highlights that MYEG’s ancillary businesses, particularly those related to immigration services, accounted for about 45% of total group revenue. The ancillary services are not likely to be impacted given MYEG’s long operating track record as a service provider with over 900 kiosks, supported by an established digital infrastructure.
The rating agency understands that MYEG’s three-year concession agreement with Immigration Department which is expiring in May 2023 will be renewed for another three-year period. Nonetheless, MYEG remains exposed to renewal and termination risks as well as regulatory changes. MARC Ratings also notes the group’s diversification strategy including venturing into blockchain technology would further dilute contribution to earnings from concession-related businesses. The rating agency will continue to monitor developments in MYEG to provide relevant updates.