9MFY21 Core PATAMI of RM46.6m (+48% YoY) is above our (79%) and consensus’ (86%) estimates, in anticipation of a rebound in 4QFY21 (in line with past post-lockdown trends). Raise FY21-22E Core PATAMI by 9-13% and TP to RM2.00 (from RM1.75) @ FY22E PER of 55x, but downgrade rating to MARKET PERFORM premised on: (I) rich valuations, (ii) potential profit-taking (at end of moratorium), and (iii) potential delay to BNM’s CCRIS resolution (though unlikely in our view).

Deemed above expectations. 3QFY21 registered a core PATAMI of RM15.2m (-1% QoQ; +10% YoY), bringing 9MFY21 CNP to RM46.6m (+48%YoY). We deem the results above our (79%) and consensus’ (86%) estimates in anticipation of 4QFY21 improvements. DPS of 0.32 sen is as expected.

Results’ highlight. YoY, 9MFY21 Core PATAMI leapt (48%) as revenue from all three groups of customers grew – key accounts (+10%), commercial (+15%), and direct-to-consumer (+79%). This was further boosted by EBIT margin improvement (+4.0ppt) from operating leverage. QoQ, despite higher revenue (+2%), 3QFY21 Core PATAMI slipped (-1%) due to higher administrative expense from financial literacy campaigns for the quarter.

Business improvements in 4QFY21. Management expects a demand rebound in the take-up of its solutions, which is in-line with past post- lockdown restriction trends. While BNM’s CCRIS data suspension is still on-going, we draw hints of potential resolution from CTOS’ explanatory notes which states that the impact is likely to be only for October and immaterial to FY21 revenue.

Raise FY21-22E Core PATAMI by 9-13% on higher core EBIT margin (+3.5/+5.3ppt) and greater FY22E key accounts growth of 20% (vs. 15% previously).

Higher TP of RM2.00 (from RM1.75) post earnings revision. Our TP is based on an unchanged FY22E PER of 55x. We downgrade the stock to MARKET PERFORM (from OP), in view of potential weakness in share price premised on: (i) rich valuations – FY22E PER of 57x (82% premium to peers) making it unpalatable for some investors, (ii) potential share overhang (major shareholders’ profit taking after the end of 6-month moratorium in January), and (iii) potential risk of drag to BNM’s CCRIS data access suspension (though we think this is unlikely). Closest peer BOL (an associate) is trading at FY22E PER of ~36x with FY21-22E earnings growth of 27-31%, and with increasing visibility (from analysts’ coverage), it could be a more attractive regional play, at this juncture.

Source: Kenanga Research - 18 Oct 2021