Overview. GHL’s 3Q21 core profit fell 53% yoy and 31% qoq to RM6m following drop in revenue registered during the quarter (-7% yoy, -8% qoq). This was primarily attributable to weaker contribution from shared services (-15% qoq, -16% qoq) (Table 3) on lower terminals’ sales, rental and maintenance charges collected from the banking sector. Core profit was further dragged by higher net opex registered during the quarter which saw EBITDA margin contracted 10ppt yoy and 3ppt qoq to 18.2%.

Key highlight: e-pay’s transaction payment value (TPV) remains solid at RM1.2bn (+8.4% yoy, +4.4% qoq). However, e-payment services’ TPV declined for the first time by 15% yoy and 8% qoq to RM4bn due to tightening movement control orders in 3Q21. Both e-pay and epayment services gross profit margins were hit by the change in product, payment, and merchant mix (lower gross profit margin for larger merchants).

Against estimates: Below. GHL’s 9M21 core profit grew 158% yoy on better consumer spending at physical stores following ease of restriction orders nationwide. However, 9M21 core profit trailed ours and consensus’ estimate at 66% and 61% respectively despite revenue came inline with our forecast. Following lower-than-expected earnings estimate, we cut 2021/2022/2023 earnings forecast by 14%/10%/15% to RM27m/RM52m/RM81m as we revisit our TPA gross profit margin assumption and cost.

Our call. Maintain HOLD at lower DCF-derived TP of RM1.92 (from RM2.00) (WACC: 9%, g: 3%), implies 2021/2022 PE of 82x/42x. Despite short-term headwinds, we foresee GHL continuous business expansion through its partnership with various electronic payment providers, ewallet players,supermarket chain and retail chain stores would provide long term earnings growth to GHL once the economic returns to prepandemic levels with the resume of international tourism, ease of movement restriction orders as well as the return of business operations from micro, small and medium-sized enterprises (SMEs). Accumulate on dips.

Source: BIMB Securities Research - 26 Nov 2021