• Overview. 4Q19 core profit rose 31.4% yoy despite flat growth in revenue. This was due to lower net opex and effective tax rate of 17.4% (4Q18: 18.7%). On qoq, core profit grew 23.3% after we excluded losses on minority interest and EI.
• Key highlights. GHL’s business recorded improvement across all market segments (Table 2) with the Philippines registering the highest growth of 26.9% on better contribution from Solutions and transaction payment acquisition (TPA) segment.
• Against estimates: Inline. FY19 core profit grew 17.4% due to higher payment terminals sales and rental as well as increase in TPA segment. Overall, FY19 core profit was inline with ours and consensus estimates at 97% and 101% respectively.
• Outlook. Management remained optimistic on cashless payment outlook for FY20 for all existing market segments. However, management raised concerns over Covid-19 outbreak as this has negatively impacted tourism and retail industry which may exert downside risk to earnings.
• Our call. Maintain a DCF-derived TP of RM1.80 (WACC: 8%, g: 3%), implying an FY20/21F PE of 37x/29x. Given recent pick up in GHL’s share price, we now have HOLD call on the stock. Despite our positive outlook on the company, we make no change to FY20’s TP and earnings estimate for now. We expect further information regarding the company’s outlook from the management at the coming analyst briefing.

Source: BIMB Securities Research - 26 Feb 2020