WITH the advent of digital banking becoming a financial norm in due course, UOB Kay Hian Research expects earnings of e-payment companies’ to grow 60% year-on-year in 2022
Bank Negara Malaysia (BNM) is expected to issue up to five digital banking licences in 1Q 2022 with the central bank having revealed in July that it had received applications from 29 different bidders.
UOB Kay Hian Research’s channel checks indicate that eight to 10 shortlisted companies out of the 29 digital banking licence applications have been presented to BNM in late-November with the award of the digital banking licenses might come as early as end-January 2022.
“We reckon this will benefit e-payment companies with more digital payment transactions in the future by tapping on new opportunities and reaching out to new merchants and customers,” opined analyst Jacquelyn Yow in an e-payment sector update.
“We maintain “overweight” on the e-payment segment in anticipation of a strong economic recovery and historic high transaction volume.”
UOB Kay Hian Research expects Malaysia’s total e-payment transaction volume and value to hit a historic high in 2022 on the back of (i) a higher non-cash transactions; and (ii) more foreigner spending contribution.
“Interestingly, the total transaction value and volume as of 10M 2021 represented 94% and 97% of 2019 levels despite the absence of foreign tourists,” observed the research house. “The strong transaction volume mainly came from both debit cards and e-money.”
“The transactions via e-money had also grown significantly with total 10M 2021 transacted value exceeding the total transacted value in 2020, indicating the strong usage and stickiness of e-wallet and e-money among consumers.”
Moving forward, UOB Kay Hian Research expects a strong three-year compound annual growth rate (CAGR) of 24% for the e-payment sector with continued earnings growth supported by higher transaction volume, stickiness of e-wallet users, and government initiatives.
On top of that, the wider payment touch points with more installation in 2022 would also boost the companies’ earnings. “We reckon that the recent dip in share price would be a great opportunity to accumulate on weakness,” reckoned the research house.
UOB Kay Hian’s top pick is GHL Systems Bhd whereby it reiterated a “buy” rating with a lower target price of RM2.30 (from RM2.40 previously).
“We view the company as a good recovery play as we expect a higher earnings growth as compared with peers,” projected the research house.
“This is mainly backed by higher contribution from its transaction payment acquisition segment in anticipation of the borders reopening with the arrival of more tourists and resumption of economic activities.” – Dec 16, 2021
