MyEG will be getting 20% of revenue over and above what the Malysian Government is able to collect on its own for implementing the electronic monitoring system (EMS) project.

Updated: Tuesday February 25, 2014 MYT 7:55:13 AM

MyEG getting 20% more revenue than what Govt is able to collect

BY EUGENE MAHALINGAM

PETALING JAYA: MyEG Services Bhd confirms that it will be getting 20% of revenue over and above what the Government is able to collect on its own for implementing the electronic monitoring system (EMS) project.

The EMS, which entails linking up the point-of-sales terminals at entertainment and retail outlets to the Royal Malaysian Customs Department (Customs) to facilitate the collection of taxes, has been a talking point among many in the corporate circles because of its supposedly lucrative returns.

MY EG Integrated Network Sdn Bhd, in which MyEG has a 40% stake, was awarded the RM180mil contract by the Customs more than a week ago to undertake the project.

The remaining shareholders of MY EG Integrated Network are Orca Capital Sdn Bhd and Simple Solutions Technologies Sdn Bhd, which has a 40% and 20% stake respectively.

A recent CIMB Research note stated that 50% of the revenue collected would go to the Government, with the remaining 50% going to the MyEG consortium undertaking the project. Based on MyEG holding 40% in the consortium, its effective share of revenue is 20%.

The report estimated that the first phase of the project’s revenue base case was around RM800mil, growing 8% to 9% every year.

It is not clear as to how much MyEG will receive from the contract.

In a filing with Bursa Malaysia yesterday, MyEG said an announcement on the contract would be made upon signing of an agreement with the Government.

Mathematically, based on the value of the EMS project stipulated in the letter of award, it “could achieve an estimated effective 20% of revenue from the increase in tax collection by participating businesses over and above what the Government is able to collect on its own,” the company said. The project commences on April 1, 2014.

“MyEG also wishes to clarify that the salient terms of the letter of award has been announced on Feb 13, 2014 of which a formal agreement will be drawn up between the company and the Government at a later date,” it said.

MyEG, which has been working on the project for the past few years, had stated that it had spent more than RM100mil to develop the system which would help reduce leakages in the collection of taxes for the Customs.

In return, the company is to get a share of the revenue on and above of what the department is collecting.

It is this revenue-sharing model that has caught the attention of critics, who draw parallel to the Automated Enforcement System (AES). However, to be fair to MyEG, neither the company nor the authorities had disclosed the full revenue model for any credible comparison to be done.

The implementation of the controversial AES project was given to two private firms, namely ATES Sdn Bhd and Beta Tegap Sdn Bhd.The companies install and maintain cameras along highways and freeways in the country with the objective of capturing images of speeding vehicles and traffic offenders.

The images and data are passed on to the Road Transport Department that issues summonses to the offenders.

The project came under fire because it was seen as the Government being inefficient and privatising the enforcement of traffic rules to the private sector.

Following objections from various groups about how the AES was being enforced, the Attorney-General’s Chambers subsequently froze all court proceedings related to summonses issued under the AES.

The Government is in the process of taking over the two companies. According to reports, Orca Capital is equally owned by Jayakumar Panneer Selvam and Kumaran Govindan Nair while Simple Solutions shareholders are Md Hamdi Mokhtar and Nurfarini Daing Abdul Rahman, while its directors are Leong Chung Meng and Sagaran Veerasamy.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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