Maintain BUY
3QFY22 earnings were up 25% YoY despite a 21% sales decline as the higher
sales mix from the ETP segment led to higher operating margin. 9M results
exceeded both our and consensus expectations, considering a potential
strong quarter ahead, supported by the festive season. We raise FY22E EPS
by 8%, but retain FY23-24E earnings due to potential consumer spending
softness. Maintain BUY with an unchanged TP of RM1.58, based on 39x
FY23E EPS, pegged to its historical average. The stock is trading at -1SD
its 4YR mean despite a projected 3-year EPS CAGR of 28%, making it
attractive in our view.
Ahead of expectations
The group posted a 21% YoY decline in sales due to lower terminal sales,
but the higher TPV has led to higher sales mix from the ETP segment,
which led to higher EBIT margin of 32.6% (vs 17.2% in 3QFY21). Despite the
lower sales and higher effective tax rate of 31% (vs 21% in 3QFY21), 3QFY22
earnings were up 25% YoY. For the 9M period, earnings were up by 29% and
made up 87% of our full-year forecast (77% of consensus). We deem this to
be above expectations, considering a potential stronger quarter ahead due
to stepped-up demand from the festive season.
Higher sales mix from ETP
Revenue in 3QFY22 declined by 21% YoY due to a 58% drop in the EDC
terminals segment as the group recorded lower device sales and rental
charges during the quarter. This was partially cushioned by revenues from
the ETP segment, up 146% YoY on the back of higher TPV, driven by the
online channels. Sales mix from ETP improved to 47% in 3QFY22 (vs 15% in
3QFY21), which led to margin accretion for the quarter.
Strong momentum into 4QFY22
We expect the strong momentum to remain into 4QFY22 due to elevated
demand relating to the festive season. We raise FY22E EPS by 8% to reflect
the latest run-rate, but retain FY23-24E EPS as we view consumer spending
may soften due to rising interest rate and the general inflationary
environment, which could impede long-term TPV growth rate. Other risks
include weaker-than-expected EDC terminal sales and demand traction on
its digital financial services (WannaPay) and insurtech (VSure).