• GHL’s 4Q17 revenue was flat qoq and fell 5.5% yoy on poor performance by MY operations which was partly offset by strong performance of the Philippines and Thailand ops.

• Meanwhile, FY17 core earnings rose 5.5% to RM22.6m as revenue grew 3.9% underpinned by all segments (solutions services: +13.7%, shared services: +1.4% and TPA business: +3.9%). FY17 core earnings were in-line with consensus but trailed our estimates.

• We keep our DCF-derived TP unchanged and upgrade to BUY. We like GHL's long term prospect given its expansive regional presence albeit near term setback is inevitable; accumulate on dips.

4Q dampened by weak Malaysia operations

The group’s 4Q17 revenue was flat qoq and fell 5.5% yoy on poor performance by its local operations due to lower hardware sales (EDC terminals) and transaction value for e-pay.

Regional fared better

Meanwhile, both Thailand and the Philippines ops sustained its growth momentum as revenues rose 67.3% yoy and 12.1% yoy respectively. The Thailand ops was led by solutions services on higher hardware and equipment sales for network infrastructure project. The Philippines ops growth were driven by solutions and shared services due to higher terminal sales and better rental and maintenance collection.

FY17 improve due to better performance from all segments

FY17 core earnings rose 5.5% to RM22.6m amidst 3.9% revenue across all segments (solutions services: +13.7%, shared services: +1.4% and TPA business: +3.9%). Overall, FY17 core earnings were in-line with consensus but trailed our expectation at 93.4%.

Long term positive view

Notwithstanding, we believe its TPA business will remain as key driver for the group’s long term earnings growth. This would be underpinned by growing adoption of cashless payments which would drive transaction volume for debit/credit card, mobile payments and internet payments. We also expect the intense competition from banks to ease post the deadline in 2020 which requires the industry to achieve 800,000 terminals and 1 billion debit card transaction volume.

Maintain our TP of RM1.70

In view of the recent share price weakness, we upgrade GHL to BUY (from Hold) and retain our RM1.70 DCF-derived TP (WACC: 7.9%, terminal growth: 3%). This implies an FY18E PE of 37x before easing to 28x in FY19E.

Source: BIMB Securities Research - 22 Feb 2018