• GHL’s 3QFY17 grew strongly 58.5% yoy and 11.1% qoq to RM5.1m on better performance from all business divisions and across all countries.

• Thailand recorded the strongest growth with 38.9% qoq increase in revenue followed by Philippines (+16.0% qoq) and Malaysia (+1.5% qoq).

• Overall, 9MFY17 core earnings grew 4.8% in tandem with 7.5% increase in revenue. The group’s 9MFY17 core earnings were below ours and consensus expectation at only 65.6% and 59.5% respectively.

• We maintain our HOLD recommendation with DCF-derived TP of RM1.70 (WACC: 7.9%%, Terminal growth: 3%).

Better performance from all countries

GHL’s 3QFY17 strongly grew 58.5% yoy and 11.1% qoq to RM5.1m (3QFY16: RM4.6). The positive growth in core earnings were underpinned by better performance from all countries. Thailand posted its 39% qoq revenue growth followed by the Philippines (+16% qoq) and Malaysia (+1.5% qoq). Thailand’s strong growth were due to stronger rental/maintenance revenue in Shared business and higher transactional fee revenue for the TPA business. The growth at the Philippines operations were due to higher merchant acceptance points for its debit card product under BancNet and from better performance in the TPA business.

9MFY17 core earnings grew but still below expectations

The group’s 9MFY17 core earnings grew 4.8% to RM15.9m (9MFY16: RM15.1) in tandem with 7.5% increase in revenue. Overall, 9MFY17 core earnings were below ours and consensus expectation at only 65.6% and 59.5% respectively.

TPA’s margin – slightly improved

We saw an improvement of TPA margin which led to 4.4% qoq growth in revenue. These were the c.9bps qoq growth in the E pay profit margin/transaction improve and a marginal c.1bps growth in margins for card payment services. These were coherent with management’s guidance of margins stabilising with more merchants acquired and overseas businesses; Thailand and Philippines gain momentum.

Maintain with HOLD recommendation

We maintain our HOLD recommendation with DCF-derived TP of RM1.70 (WACC: 7.9%%, Terminal growth: 3%).

Source: BIMB Securities Research - 28 Nov 2017