• 1Q18 core earnings rose 18.2% yoy and 12.4% qoq to RM7.2m despite the lower revenue as the growth was driven by lower net opex achieved.

• Malaysia ops fell 19.2% yoy and 2.1% qoq owing to lower shared services (ie. lower hardware sales) and TPA contributions as a result of lower transaction volume.

• Overall, 1Q18 core earnings were inline with ours and consensus’ estimates making up at 29.8% and 23.9% respectively.

• Maintain BUY at a DCF-derived TP of RM1.70 (WACC: 7.9%, terminal growth rate: 3%). We believe this is fair given to its expansive presence in e-payment services regionally.

Earnings improved despite lower revenue

1Q18 core earnings rose 18.2% yoy and 12.4% qoq to RM7.2m despite lower revenue reported. This was achieved on the back of lower net opex which saw EBITDA margin expanding by 373bps yoy and 177bps qoq to 22.8%. Overall, 1Q18 core earnings were inline with ours and consensus estimates making up at 29.8% and 23.9% respectively.

Drop in M’sia ops dragged revenue

Malaysia ops, which contributed 81% of total revenue, fell 19.2% yoy and 2.1% qoq on weaker shared services following lower hardware sales while the TPA business also saw lower transaction volume. Despite the weaker sales, MY EBITDA improved 3.2% yoy with higher MDR transaction fees collected from e-payment TPA.

Regional growth remain encouraging

Meanwhile, both Thailand and the Philippines ops sustained growth momentum as revenues rose 108.4% yoy and 14.3% yoy respectively. The Thailand ops saw improvements across all segments (better rental collection, higher hardware & software sales and improved MDR fees collected). The Philippines ops growth was driven by solutions services and TPA businesses.

Acquisition Paysys – expansion opportunity to GHL

On 5 Apr 2018, GHL entered into conditional share sale agreement (SSA) with Paysys Group Holding Sdn Bhd (PGHSB) to acquire 100% of the equity interest in Paysys (M) S/B for RM80m. We believe this could benefit GHL’s business in the long term especially under shared services owing to Paysys’ main business of selling and rendering payment terminals to merchants.

Maintain BUY at a TP of RM1.70

We maintain our BUY with a DCF-derived TP of RM1.70 (WACC: 7.9%, terminal growth rate: 3%). This implies a FY18F PE of 38x before easing to 27x in FY19F. We believe this is fair given to its expansive presence in e-payment services regionally.

Source: BIMB Securities Research - 31 May 2018