• Overview. 3Q20 core profit surged 70% yoy and over 100% qoq to RM12.7m. This was attributable to strong recovery in all business segments across regional markets (Table 2 & Table 3) coupled with lower net opex during the quarter.

• Key highlights. Transaction processing value (TPV) for e-pay and card payment services recorded the highest value in 3Q20 at RM1.1bn and RM4.7bn respectively (Table 4). Still, gross profit per transaction value was relatively low due to product mix but improving as more merchants are starting to reopen.

• Against estimates: Below. 9MFY20 core profit trailed ours but inline with consensus’ estimate at 53% and 75% respectively. We revised our 2020F/2021F/2022F earnings by -25%/-17%/8% (Table 5) as we see slower merchants acquiring activity and weaker gross profit for TPA business may continue in 2021 mainly due to Covid-19 pandemic.

• Outlook. We remain positive on GHL’s long-term business prospects amidst continuous efforts from the government to adopt digital payment as well as rise in contactless payment trend. Also, by assuming Covid-19 vaccine to be widely available by end-2021, we foresee stronger earnings growth in 2022 underpinned by recovery in consumer consumption and tourism, in our view. We expect GHL’s earnings to grow at a CAGR of 31% over 2019-2022F.

• Our call. Maintain BUY with higher DCF-derived TP of RM2.15 (from RM1.43; ex-bonus) (WACC: 8.7%, g: 3%) (Table 6). Our valuation implies 2021F/2022F PE of 58x/37x

Source: BIMB Securities Research - 20 Nov 2020