Strong 3Q15 revenue growth at 93% YoY (China/overseas:+79%/ +110% YoY), but expect slower 4Q15 on high base in 4Q14
4 key pillars emerging: Mid. East&Africa (POS penetration), Brazil(mPOS/POS), U.S. (EMV/multilane), and China (mPOS/Smart POS)
Maintain BUY with TP of HK$12.0, based on 15.5x FY16E ex-cashP/E plus HK$2.63 cashOverseas: accelerating expansion in MEA/Brazil/U.S.
Following robust overseas revenue in 3Q15 (+110%YoY), we reiterateour strong confidence on PAX to achieve 27% FY15-17E sales CAGR inoverseas market, thanks to 1) strong foothold in Middle East with 15%mkt. share, 2) continued share gain from Verifone in U.S. with multilaneterminals/mPOS rollout in 4Q15/1Q16, and 3) stronger mPOS leadershipin Brazil (>90% share) and start tapping into trad. POS segment in FY16.
China: Strong rebound in 3Q but near-term weakness in 4QWe fine-tuned our FY15-17E revenue by 1-3% and NP estimates by 1-5% mainly on China weakness. Given unchanged FY15E China salesgrowth guidance (+10% YoY), we estimate that 4Q15 sales may decline10% YoY, due to softer ASP with product mix shift to low-end terminals/mPOS. We expect China market in FY16E to remain tough with 5%+ YoYASP decline despite 20-30% YoY shipment growth. We are encouragedby strong China sales in 3Q15 (+78% YoY), attributable to 1) 1H15 salesrecognition delay, 2) ramp-up of new product launched in July, and 3)resumption of 3rd party acquirers business in 2H15.
Maintain BUY with multiple catalysts aheadWe slightly reduced our FY15-17E EPS by 1-5%, and our new FY16EEPS is 3% above consensus, as we believe FY16E is the time to bearfruits in the US and Brazil with new product rollouts. We maintain BUYwith TP of HK$12.0, based on 15.5x ex-cash FY16E P/E plus HK$2.63cash. Our TP implies 11% discount to average of its global peers givenhigher uncertainties in China and lower recurring revenue exposure. Wethink current valuation of 11.9x ex-cash FY16E P/E is attractive. Potentialupside comes from multilane order wins in U.S., smart POS inChina/Brazil and recurring revenue from M&A.