• GHL was awarded the contract for MoF’s RON95 Petrol Subsidy scheme worth RM25m. We expect the implementation to take full effect in 2H 2019.

• We view the contract positively given the huge opportunity for GHL to expand its TPA business and provide mitigate the effect of declining e-pay transaction value.

• We raised our earnings forecast 2019-21F by 59%/60% as we expect improve in all business segments and margin assumption of c.20-23% coming from the scheme.

• Upgrade to BUY at DCF-derived TP of RM2.00 (from RM1.60) (WACC: 7.9%, terminal growth rate: 3%).

A pleasant surprise

GHL has been awarded the RON95 Petrol Subsidy scheme by the Ministry of Finance worth RM25m. The contract entails development, implementation and operation of hardware and software applications at petrol stations. We expect the implementation take effect in 4-6 months (sometime in 2H 2019) with high possibility of being fasterthan-expected given GHL’s experience in point-of-sales (POS) system.

Structural growth in 2019/2020F

We foresee this providing structural earnings growth for transaction payment acquisition (TPA) business as transaction value per terminal is likely to increase; a much needed buffer against the declining e-pay transaction business. Additionally, the system rollout could benefit the other segments – shared services and solutions services via new terminal upgrades and/or higher terminal rental income. We raised 2019/20F earnings by 59%/60%.

BUY at RM2.00 TP (from RM1.60)

Upgrade to BUY with an RM2.00 DCF-derived TP (from RM1.60) which values the stock at 2019/20F PE of 30x/26x. We are positive over the awarded scheme given the government supports towards cashless payment for better efficiency and transparency system. However, we remain cautious over transaction margin as we expect it to erode faster than expected.

Source: BIMB Securities Research - 28 Mar 2019