Pax Global Technology 327.HK
From Yamaichi research.....received the report yesterday from our HK broker.
- PAX Global (327 HK) announced 73% growth in FY14 net profit to
HK$392 mn, on the back of 61% increase revenue to HK$2,373 mn.
Catalysts
- US and Western Europe to enter harvest period. After years of
marketing effort, US and Western Europe markets will enter into
harvest period this year: (i) PAX has largely overcome the entry
barrier of Class B certification in US and growth in US will be further
fuelled by the EMV standard upgrade. (ii) PAX has
forged partnership with CCV, who worked exclusively with Verifone
previously, for Western Europe marketing, (iii) Given higher entry
barrier in advanced economies, management is confident that US
and Europe can achieve higher gross margin and hence maintain
group profitability, (iv) Based on management target to raise
overseas revenue contribution to 70% in 3 years time, we raise
overseas revenue growth forecast to 60%65% for FY15F/16F.
- Mobile POS as Blue Ocean. (i) Management reveals MPOS is for
C2C and micro-merchant. As a new form of payment, MPOS is not
necessarily to cause cannibalization to traditional POS terminal, (ii)
MPOS contributed to sales surge in Brazil and China will see strong
growth, as partly driven by replacement demand for telephone
terminal payment, (iii) Management attributed the 0.3pts group
gross margin decline to MPOS delivery in Brazil and the situation
shall improve after ramping up revenue scale.
- Can ride on Apple Pay and QR payment. (i) PAX has teamed up
with CCB to promote Apple Pay in China and we expect the current
70% NFC embedded POS ratio will rise further in China, (ii) QR
payment terminal S90Q has good market response and is working
for Alipay and Tenpay.
Our View
-FY15F/16F revised up by 5.3%/6.9%, maintain BUY. We revise up
FY15F/16F net profit by 5.3%/6.9%, as more buoyant overseas
revenue forecast was partly offset by more cautious projections on
gross margin. Our revised model still points to 34.2% 2 years CAGR
in net profit to FY16F. Our revised target price at
HK$12.45 represents 34.3x/26.8x FY14F/15F PER, and 0.8x
FY15F-16F PEG.
- PAX Global (327 HK) announced 73% growth in FY14 net profit to
HK$392 mn, on the back of 61% increase revenue to HK$2,373 mn.
Catalysts
- US and Western Europe to enter harvest period. After years of
marketing effort, US and Western Europe markets will enter into
harvest period this year: (i) PAX has largely overcome the entry
barrier of Class B certification in US and growth in US will be further
fuelled by the EMV standard upgrade. (ii) PAX has
forged partnership with CCV, who worked exclusively with Verifone
previously, for Western Europe marketing, (iii) Given higher entry
barrier in advanced economies, management is confident that US
and Europe can achieve higher gross margin and hence maintain
group profitability, (iv) Based on management target to raise
overseas revenue contribution to 70% in 3 years time, we raise
overseas revenue growth forecast to 60%65% for FY15F/16F.
- Mobile POS as Blue Ocean. (i) Management reveals MPOS is for
C2C and micro-merchant. As a new form of payment, MPOS is not
necessarily to cause cannibalization to traditional POS terminal, (ii)
MPOS contributed to sales surge in Brazil and China will see strong
growth, as partly driven by replacement demand for telephone
terminal payment, (iii) Management attributed the 0.3pts group
gross margin decline to MPOS delivery in Brazil and the situation
shall improve after ramping up revenue scale.
- Can ride on Apple Pay and QR payment. (i) PAX has teamed up
with CCB to promote Apple Pay in China and we expect the current
70% NFC embedded POS ratio will rise further in China, (ii) QR
payment terminal S90Q has good market response and is working
for Alipay and Tenpay.
Our View
-FY15F/16F revised up by 5.3%/6.9%, maintain BUY. We revise up
FY15F/16F net profit by 5.3%/6.9%, as more buoyant overseas
revenue forecast was partly offset by more cautious projections on
gross margin. Our revised model still points to 34.2% 2 years CAGR
in net profit to FY16F. Our revised target price at
HK$12.45 represents 34.3x/26.8x FY14F/15F PER, and 0.8x
FY15F-16F PEG.
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