• Overview. GHL’s 4Q20 core profit fell 31% yoy and 58% qoq to RM5m despite a marginal decline in revenue. Core profit was dragged by higher net opex, low margin products and higher effective tax rate during the quarter.

• Key highlights. Despite lockdown and restriction movement control order regionally amid the pandemic, GHL’s revenue grew 29% yoy to RM334m in 2020 on the back of improvement in all business segments (Chart 3). Transaction payment acquisition (TPA) which contributed 60% to 2020’s revenue saw tremendous growth in transaction processing value (TPV) for both e-pay and card payment services (Table 4). Still, gross profit margin per transaction value was relatively low due to product mix but we expect it to improve by 2H21 as smaller merchants (which provide higher margins) are starting to reopen.

• Against estimates: Below. FY20 PBT was broadly inline with our estimate but core profit (excluding EI) fell short at 88% on higher-than expected effective tax rate.

• Outlook. Despite earnings coming below our estimate, we expect better earnings performance in 2021 following better consumer consumption amid Covid-19 vaccination. Besides, we remain positive on GHL given continuous efforts from the government regionally to adopt digital payment and rise in contactless payment trend to provide structural earnings growth in the long run.

• Our call. Maintain BUY with an unchanged DCF-derived TP of RM2.15 (WACC: 8.7%, g: 3%) which implies 2021F/2022F PE of 58x/37x.

Source: BIMB Securities Research - 24 Feb 2021