• Overview. 2Q20 revenue fell 18.4% yoy and 17.6% qoq on lower contribution from all business segments (Table 1 & Table 2) due to lockdown and movement control order (MCO). Excluding RM2.3m from Paysys’s share consideration and RM11.9m investment write off in Cambodian operation, core profit grew 66.7% yoy and 88.3% qoq to RM9.9m.

• Key highlights. Card payment services’ transaction processing value (TPV) surged 30.9% yoy (Table 3) supported by higher transaction in May and June. However, gross profit declined 37.5% yoy due to 1) reduction in high margin product payment types (tourism and leisure) and 2) lower contribution from smaller merchants (Tier-3 & Tier-4) which provide higher margins.

• Against estimates: Below. GHL’s 1HFY20 core profit trailed our and consensus’ estimate at 37% and 45% respectively. The shortfall was mainly due to weak contributions from all business segments across its main markets (Malaysia, Philippines and Thailand).

• Outlook. Despite earnings coming below our estimates, we remain positive on GHL’s long-term business prospects amidst continuous efforts from the government to adopt digital payment as well as rising contactless payment trend. We expect better earnings performance in 2H20 as more businesses are reopening, increase in online and cashless payment as well as government’s initiatives to encourage ewallets, e.g through ePenjana RM50.

• Our call. Our earnings, TP and recommendations are currently under review pending updates from the upcoming results briefing.

Source: BIMB Securities Research - 27 Aug 2020