• GHL’s 9MFY16 net earnings of RM13.7m are above with our expectation, making up 84% of our forecast.

• Revenue 9MFY16 grew +15.9% yoy to RM60.4m (9MFY15 – RM52.1m) with growth registered in all three operating segments.

• Additionally, net profit 9MFY16 grew +73.6% yoy attributed by better net profit margins of 7.9%.

• We revised up our FY16 and FY17 net earnings forecast to RM18m and RM21.3m respectively and upgrade to HOLD recommendation.

Shared services. Shared services revenue is mainly derived from the sales, rental and maintenance of EDC terminals and other card acceptance and the supply of cards to banks and other payment operators. Shared services revenue in 9MFY16 grew +16% yoy to RM37.7m (9MFY15: RM32.4m) attributed by better EDC hardware sales, rental and maintenance fees collected.

Solution services. Solution services revenue is mainly derived from the sales and services of payment solutions which include payment networks and processing of payment. Solution services revenue is up by 74% in 9MFY16 to RM10.3m (9MFY15 – RM5.9m) due to better hardware and software sales.

Transaction Payment Acquisition (TPA). TPA business comprises of reload and collection services through e-pay and card payment services. TPA revenue grew strongly by 13% in 9MFY16 to RM130.8m (9MFY15: RM116.1m) due increased in transaction value processed.

Upgrade to HOLD recommendation. We revised our FY16 and FY17 net earnings forecast due to its improved margin and lower than expected payroll expenses. Our new forecast is RM18m for FY16 and RM21.3m for FY17 (previously RM16.3m and RM17.3m respectively). We upgrade our recommendation to HOLD with a new target price of RM0.82 (previously RM0.67) based on sector average PER of 25x.

Source: BIMB Securities Research - 29 Nov 2016