How does MGS have a return of 7% after fees 

From my understanding, UBB Amanah is a lender to most of the MOF approved factoring companies. 

The majority of these factoring companies only support invoices that are guaranteed by either the government, or by large listed corporations like TM, meaning that the risk of a NPL is minimal (albeit, there is still a risk).

Many (I dont know a %) of companies awarded government cleaning and security contracts rely on factoring for cashflow, and there are literally thousands of these contracts.

The factoring companies can return between 18-36% p.a, so would likely borrow from UBB at between 12-14% p.a.

Planworth and Ikhitar generally charge a 2% upfront fee for lending, plus around 1% per month until the invoice has been settled.
They lend between 80-90% of invoice value.  The invoice is "sold" by the contractor to the factoring company, meaning that the government pays directly to the factoring company.
They take out what they are owed, and remit the balance to the contractor.

Contractors use these factoring companies due to their fast approval times to enable them to pay immediate obligations such as payroll and minimal collateral requirements.
 
Contractors have very few options, as these factoring companies can provide capital within 4 working days where as commercial banks may take 1-6 months for approval as well as requiring heavy collateral.

The products offered by commercial banks are far less suited to these objectives when compared to those companies that focus solely on providing cashflow to companies with government related contracts. 

I do not know much about Kenaga Factoring, but do note that they make an effort to avoid mentioning rates on their website.

Hence, I don't see UBB being a scam, but rather they have found a niche in a particular market that can absorb a lot of capital.
I don't know who else is filling this void?

That said, an investment in UBB is not risk free.

There are potential collection issues is a contractor is bankrupted or wound up or any other situation where their accounts are frozen.

Contractors can be terminated or heavily penalized by the government for poor performance.  It would be possible for a factoring company to lend more to a contractor than what they are paid (say a contractor invoices for RM100,000.  Factoring company will lend 85% or RM85,000.  Government imposes a poor performance penalty of 30%.  Factoring company gets paid RM70,000 but has already lent RM85,000).  Though this can be mitigated by having a minimum duration of factored invoices (say if it for a cleaning contract that has a monthly invoice, the factotring company can have a minimum of 12 invoice factored concurrently.

There is a potential for the government to tighten up their procurement process and only award contracts to companies with substantial cash reserves, essentially eliminating the need for factoring, and trapping UBB with excess funds that they are unable to loan.

Do your home work and know your risks.