Credit Update: MYEG Diversifies Revenue and Strengthens Credit Profile Through Blockchain Expansion

Highlights

• MYEG secured a 3-year extension (till May 2026) for JPJ online services covering vehicle registration, driver licensing, and summons payment.
• Strategic tie-ups with China Customs (GACC) and Federation of Malaysian Freight Forwarders (FMFF) position ZTrade as future National Single Window (NSW) for trade.
• MYEG delivered strong financial performance, supported by solid revenue growth and robust credit metrics. Its sound liquidity position, healthy cash reserves, and stable gearing underscore its strong fundamentals and capacity to meet financial obligations
• Given MYEG's recurring core revenue, diversified blockchain income, low leverage level and strong liquidity. We remain positive on MYEG existing bond.

Company Overview

MYEG Services Berhad (MYEG) is a leading Malaysian e-government service provider offering digital services such as road tax renewal, licensing, and immigration-related applications. By leveraging digital platforms, MYEG streamlines public-sector processes, enhancing both efficiency and user experience.

In recent years, MYEG has strategically ventured into blockchain technology to support cross-border digital services. Central to this Web3 strategy is Zetrix, a Layer-1 public blockchain platform developed with China’s Xinghuo Blockchain Infrastructure Framework (BIF), enabling decentralized applications and cross-border integration.

MYEG’s Core Business: Driving Stable and Recurring Revenue Growth

MYEG’s core business, comprising government concession services and commercial services, remains the backbone of operations, delivering stable and recurring revenue. As of FY24, these segments accounted for 61% of the group’s total revenue. As shown in Table 1, they represent the majority of key services provided by MYEG.

This stable contribution was supported by revenue rising from RM616 million to RM624 million in FY24, mainly driven by growth in government concession services. This reflects the ongoing demand for essential e-government and digital services. The recurring nature of these services such as road tax, license renewals provide consistency, lessening the impact of economic fluctuations.

Additionally, MYEG’s strong market presence and long-standing government ties ensure stable transaction volumes. Widely adopted digital platforms further enhance user convenience and revenue predictability.

Table 1: MYEG’s core business segments

MYEG’s Stake in NIISe Operator HeiTech and Service Extensions Bolster Long-Term Stability

In February 2023, the Malaysian government announced plans to centralize immigration-related services under the National Integrated Immigration System (NIISe). Despite targeting full internalization by 2025, implementation delays have led to an extension of MYEG’s existing roles.

In May 2023, the Ministry of Finance approved the continuation of MYEG as a collection agent and online service provider for the Immigration Department. Additionally, MYEG secured a three-year extension (until May 2026) for its online services contract with the Road Transport Department (JPJ), covering vehicle registration, licensing, and e-payment for summonses. Revenue is volume-based and conditional on system improvements.

Notably, MYEG holds a 15.89% stake in HeiTech Padu Berhad, the main contractor for the RM892.2 million NIISe project. The contract spans 60 months, beginning on October 2024, and ending on October 2029. Although MYEG is not the direct operator, this strategic investment provides indirect exposure to NIISe, aligning the group with national immigration digitalisation efforts. We believe the government is likely to further extend MYEG’s role in online immigration services through 2029 to ensure continuity during the transition.

Strategic Blockchain Collaboration Enhances MYEG’s Role in ASEAN’s Digital Economy

MYEG is playing a pivotal role in Malaysia’s digital transformation through Zetrix, developed alongside MIMOS Berhad under the Malaysia Blockchain Infrastructure (MBI), governed by the Ministry of Science, Technology and Innovation (MOSTI). The platform supports critical use cases such as digital ID, supply chain traceability, and asset tokenization. With increasing regulatory engagement including pilot programs by Securities Commission Malaysia and Khazanah Nasional Berhad for tokenized bonds and sukuk MYEG is well-positioned to benefit from emerging blockchain-driven revenue opportunities.

In a further step to strengthen regional digital integration, MYEG recently signed with Singapore’s Singapore’s STrade Data Exchange Service Pte Ltd (SGTraDex) to enable secure, cross-border data exchange between their platforms. This collaboration aims to fully digitalize trade between Malaysia and Singapore, aligning with broader ASEAN initiatives for digital infrastructure harmonization and boosting MYEG’s strategic relevance in facilitating verified electronic trade across the region.

ZTrade Strengthens MYEG’s Cross-Border Digital Trade Capabilities

In March 2023, MYEG partnered with East Logistic-Link Co. Ltd, a wholly owned agency under China’s General Administration of Customs (GACC), to launch ZTrade, a blockchain-based trade facilitation platform. ZTrade streamlines Malaysian exports to China by enabling the digital submission of Certificates of Origin (COO) and other key trade documents such as food safety and quarantine certificates directly to China’s Single Window system, ensuring faster and more secure customs clearance.

In July 2024, ZTrade expanded to support two-way COO validation between Malaysia and China, eliminating the need for physical documentation. The platform was further strengthened in September 2024 through a partnership with the Federation of Malaysian Freight Forwarders (FMFF), positioning ZTrade as Malaysia’s National Single Window (NSW) platform. With benefits including up to 2 times faster clearance, reduced port-related costs, and blockchain-verified documentation, ZTrade offers MYEG a strong first-mover advantage in regional trade digitization.

ZTrade operates on a transaction-based model, charging a one-time registration fee of RMB 1,400 (MYR 889) and RMB 200 (MYR 127) per COO submission, creating a recurring and predictable income stream. Given that China is Malaysia’s largest trading partner (16.8% of total trade), ZTrade is expected to experience rising transaction volumes, particularly for Malaysian exports to China.

Revenue Boost in March 2025 Driven by Blockchain Platform with Strong Margin

As shown in Chart 1, MYEG’s revenue rose 29% from RM233 million in March 24 to RM300 million in March 25. The increase was driven primarily by service fees from Web3 applications on Zetrix, including ZTrade, ZCert, and Digital ID transactions.

The core business comprising government concession services and commercial services as continues to provide a solid revenue foundation through stable recurring services such as road tax and license renewals. Together, these segments support MYEG’s overall financial strength.

However, the operating profit margin narrowed slightly from 79% to 75%, likely due to increase operating expenses. Nonetheless, the group maintains a strong average margin above 70%.

Chart 1: MYEG’s Revenues, Operating Profit and Operating Margin

Healthy Leverage Level with Strong Liquidity

As shown in Table 2, total debt remained stable, while net gearing ratio declined from 31% to 25%, driven by a rise in cash and cash equivalents, from RM374 million to RM440 million.

Interest coverage ratio remained steady at 11.3 times in March 25, while liquidity improved significantly, as evidenced by the increase in the cash-to-short-term debt ratio from 3.05 to 3.61 times and current ratio from 5.76 to 7.39 times. In addition, MYEG’s net debt-to-EBITDA ratio stood at a low 0.96 times in March 25, reflecting a healthy leverage level.

Even if blockchain revenue contributed approximately 36% of total revenue in FY24 is excluded, given that blockchain adoption remain at an early stage and limited transparency, MYEG’s core business alone provides ample coverage for strong profitability and debt obligations. MYEG’s debt profile is well-positioned, with low credit risk over short- to medium-term.

Table 2: Key Credit Metrix

Overall, MYEG has strengthened its credit profile through strategic service extensions, a diversified blockchain segment, and improved liquidity. Its stake in HeiTech aligns the company with national immigration objectives, while its financials remain healthy. With enhanced liquidity and a manageable debt position, MYEG is well-positioned for long-term growth and to capitalize on rising opportunities in Malaysia’s and ASEAN’s expanding digital economy.

Recommendation

Given MYEG's recurring core revenue, diversified blockchain income, low leverage level and strong liquidity. We remain positive on MYEG existing bond. Table 2 below shows the bond details for bondholders’ references:

Table 2: MYEG’s Bond

Key Risk

• Operational risks: The deployment and scalability of MYEG’s blockchain services depend on seamless integration, cybersecurity robustness, and user adoption. As blockchain is still a maturing technology, there are risks of technical glitches, system vulnerabilities, and integration setbacks, particularly with foreign government systems like China's Single Window. Additionally, the lack of a universally accepted regulatory framework across jurisdictions could delay adoption and raise compliance costs.
• Regulatory Compliance and Data Privacy: MYEG handles sensitive personal and government data. Failure to comply with data protection law (e.g. PDPA) may result legal penalties, and reputation damages.
• Termination risks: Malaysian Government may expedite the internalization of immigration services under NIISe faster than expected, potentially impacting MYEG’s legacy e-government revenue.