MIDF Investment Bank (MIDF), in its recent update, reiterated its BUY recommendation on MY E.G. Service Berhad (MYEG) with an unchanged target price of RM1.38 following the commencement of ZTrade services.
MIDF noted that after the signing of the ‘Joint Statement of the Ministry of Finance of Malaysia and GACC on Single Window Cooperation in Cross-Border Trade’ on June 19, 2024, MYEG received notification letters from East Logistic-Link Co, an agency of the General Administration of Customs of the People’s Republic of China (GACC). The notifications confirmed the connectivity deployment with ZTrade services for recognising the Certificate of Origin issued by the Ministry of Investment, Trade and Industry of Malaysia and GACC, as well as the Phytosanitary Certificate and other product certificates issued by the Ministry of Agriculture and Food Security of Malaysia and GACC.
With the completion of this deployment, the live connectivity of ZTrade services to GACC’s Single Window platform is now enabled. ZTrade operates on MYEG’s blockchain platform, Zetrix, allowing all data in these certificates to be available accurately in near real-time, thus increasing tariff computation and customs clearance efficiency.
MIDF maintained its positive outlook on MYEG, emphasising that the ZTrade service would provide significant benefits. Although it is not mandatory yet, exporters using the service will benefit from faster and more convenient clearance processing for trades going into China. This should incentivise exporters to adopt the service ahead of the mandatory requirement.
MYEG is expected to offer ancillary services that will further boost income and margins from this trade facilitation service. This approach mirrors the e-government services platform, and regionally, the group is also seeking to replicate this arrangement in the Philippines.
Given these developments, MIDF anticipates that the potential contribution from the Zetrix platform could match and eventually surpass the existing contribution from e-government services. However, they have kept their earnings estimates unchanged at this juncture, having partially factored in the contribution from ZTrade.
MIDF reiterated its BUY recommendation for MYEG with a target price of RM1.38, highlighting the positive developments surrounding ZTrade services and the potential for future growth.
