1. finance
2. personal finance
3. lending
4. credit cards

Company Update, 23 January 2015
Goldpac Group (3315 HK)
Buy (Maintained)
Technology - Technology
Market Cap: USD540m
Target Price:
Price:
HKD8.90
HKD5.04
Macro
Risks
Key Concerns Addressed At Plant Visit
Growth
Value
Goldpac (3315 HK)
Price Close
Relative to Hang Seng Index (RHS)
10.30
124
9.30
111
8.30
97
7.30
84
6.30
71
5.30
57
4.30
70
44

50
40
30
Nov-14
Sep-14
Jul-14
May-14
Mar-14
Jan-14
Vol m

10
Source: Bloomberg
Avg Turnover (HKD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (HKD)
Free float (%)
Share outstanding (m)
Shareholders (%)
12.8m/1.65m
88.9
76.6
4.78 - 9.50
38
831
Mr. Lu Run Ting
Gemalto
43.4
18.4
Share Performance (%)

Strong volume growth since Dec 2014. We hosted a visit to Goldpac
Group’s (Goldpac) Zhuhai factory on 21 Jan for investors. Management
said that volume growth of integrated circuit (IC) cards has remained
strong since Dec 2014 for two key reasons. First, the newly-issued
PBOC 3.0 standard (a higher security standard that all banks should
comply with by 1 Apr 2015), has had a minimal negative impact on cards
issued as the necessary upgrades of IT systems by banks to comply with
the new standard has already been completed. Second, demand for IC
cards remains strong. The company has been running at full capacity on
chip cards YTD with a strong orderbook till next month.
Positive outlook for other businesses. Management also sees robust
growth momentum for its non-banking cards (ie social security and
healthcare cards) from 2016. It expects the volume of healthcare cards
(also smart IC cards) to increase to over 10m in 2015 from a few
hundred thousand last year. Overseas expansion is also well on track.
Goldpac's production facilities in the Philippines will commence operation
this month. Including HK, the Philippines is its second overseas
operations and management believes it will expand into more countries.
Reiterate BUY with a revised HKD8.90 TP. We lower our TP to
HKD8.90 (from HKD9.50) on an unchanged 17x FY15F P/E. Maintain
BUY. We tweak our EPS lower by 5% for FY15-16 on slightly lower ASP
assumptions, mainly due to a faster-than-expected decline in IC chip
cost. We forecast recurring EPS growth of 42% and 27% YoY for FY14
and FY15, respectively. Goldpac has achieved No.1 market share in
domestic IC card shipments by both value and volume. However, it is
trading at 10x 2015F P/E, substantially below its A-share listed peers of
30x and strategic shareholder Gemalto's (GTO NA, NR) 16x. As its
outlook remains intact, we think the recent share price correction offers
an attractive BUY opportunity.
YTD
1m
3m
6m
12m
Absolute
(5.8)
(9.2)
(31.4)
(36.5)
(40.7)
Forecasts and Valuations
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
Relative
(9.0)
(13.2)
(35.5)
(38.9)
(46.2)
Total turnover (CNYm)
677
1,112
1,514
2,349
2,913
Reported net profit (CNYm)
115
141
224
344
449
Recurring net profit (CNYm)
103
168
254
361
459
Recurring net profit growth (%)
67.8
63.6
51.0
42.1
27.3
Recurring EPS (CNY)
0.20
0.30
0.29
0.42
0.53
DPS (CNY)
0.10
0.17
0.07
0.10
0.14
Recurring P/E (x)
20.0
13.7
13.8
9.7
7.6
P/B (x)
9.64
1.54
2.14
1.84
1.55
P/CF (x)
8.9
21.8
10.4
7.9
5.9
Dividend Yield (%)
2.4
4.3
1.7
2.6
3.4
EV/EBITDA (x)
12.8
3.9
6.8
4.2
2.7
Return on average equity (%)
63.9
17.5
15.1
20.3
22.6
Shariah compliant
Jackson Yu, CFA +852 2103 9424
[email protected]
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
See important disclosures at the end of this report


2

.
2
0
.
3
0
0
.
1
0
0
We recently hosted a reverse roadshow to the Zhuhai production plant. .
0
Maintain BUY with a slightly lower HKD8.90 TP (17x FY15F P/E, 76.6% 0
upside). Management believes that investor concerns over potential 0
shipment delays are unwarranted as orders have remained strong since
Dec 2014. Goldpac remains optimistic on its outlook, especially for
volume growth in FY15-16. Nonetheless, we trim our FY15-16 EPS by
5% on lower ASP assumptions.
60
20




Source: Company data, RHB
net cash net cash net cash net cash net cash
(3.2)
(2.4)
Powered by EFATM Platform
(7.0)
1
Goldpac Group (3315 HK)
23 January 2015
Top Investors’ Q&As
We recently organised a reverse roadshow to Goldpac's Zhuhai production plant with
a group of investors. Overall, management remains optimistic on its outlook,
especially for volume growth in FY15-16.
Investors’ feedback from the trip was generally positive and they believe the outlook
for Goldpac is promising. In this note, we highlight responses from management to
five key questions from investors.
What are Goldpac’s key competitive advantages over its peers?
Management highlighted that Goldpac has become the largest card manufacturer in
terms of value and volume in 2014 with about 20% market share, according to China
Union Pay.
Management believes the barriers of entry to the financial card industry and the
competitive edges are mainly related to service reliability, services variety and
innovation capabilities.
 Certification from payment organisations is
one of the key barriers for the industry
 Goldpac's full range of services is one of its
key competitive edges compared to its peers
Firstly, Goldpac is the only card manufacturer that is certified by all six payment
organisations, ie Visa, MasterCard, American Express, China UnionPay, JCB and
Diners Club International, while most of its peers in China are certified by UnionPay
and Visa only. These payment organisations conduct frequent inspections on
Goldpac’s production flow, security control as well as product quality. Owning these
certifications implies Goldpac’s adherence to the industry's high product standard.
Product quality and suitability are also the reason Goldpac can expand its presence
into Hong Kong and Macao, as international card issuers usually work with a wider
circle of payment card organisations. Goldpac currently has over 60% market share
in Hong Kong in terms of new card issuance.
Secondly, providing one-stop solutions to banks is also one of the key factors that
banks would work with Goldpac. Goldpac's services cover almost all the outsourcing
card services for banks, from card body design, software embedding, to
personalisation and mailing to end-customers. The delivery cycle for the company is
only 1-2 days after they receive orders from banks.
Compared against other competitors, Goldpac provides more integrated services –
which results in it offering more value-added services to customers. The company is
the largest personalisation services provider in China, according to Frost & Sullivan.
Personalisation services include a series of customised services like loading personal
data, associate packaging and card mailing. The company is able to distribute
personalised cards directly to end-users 24 hours a day and seven days a week on
behalf of their customers.
 Strong software R&D capabilities differentiate
Goldpac from its peers
Thirdly, product research and development (R&D) is one of the emerging factors that
banks value nowadays. According to management, following the migration policies of
IC chip card in China and Visa/Master card entering into China, banks are also
looking at software solution capabilities and R&D capabilities of card suppliers when
they choose card suppliers. Management believes Goldpac stands out with its strong
internal R&D team providing a wide range of software solutions to card issuers, while
its competitors still rely on outsourcing software solutions companies. R&D cost will
account for over 40% of its topline in the next few years.
What are Goldpac’s key earnings growth drivers going forward?
 Management is optimistic on card shipment
growth in FY15-16
Banking chip cards. Management believes chip card growth will be the company’s
main earnings driver in the three two years. According to the migration mandate
released by the People’s Bank of China (PBOC), all banks in the country are required
to retire the issuance of magnetic stripe bank cards by 1 Jan 2015. Management
expects the number of new chip cards issued in China to grow 50-80% YoY in the
next few years, and Goldpac is trying to expand its market share in tandem with the
industry growth.
The company has raised its capacity to 300m cards at the end of 2014, from 250m
cards at the end of 2013. Goldpac has the flexibility to shift capacity between
magnetic cards and IC chip cards. With third phase of its production capacity already
in place at the end of 2014, management sees upside potential on further capacity
expansion in the year.
See important disclosures at the end of this report
2
Goldpac Group (3315 HK)
23 January 2015
According to management, since late Dec 2014, Goldpac's plant is running at full
capacity and order pipeline has been strong as well. Management sees accelerating
volume not just from big banks but smaller banks as well. Goldpac sees strong
volume growth from smart card under PBOC 3.0 standard, which is a higher security
standard required by the PBOC, implying banks are well-prepared for the new
standards. Management is encouraging staff to stay in the factory during the Chinese
New Year so as to fulfil orders on hand. Goldpac is confident that the company will
report strong chip card volume growth in 2015-2016.
 Non-banking cards such as healthcare cards
and social security cards could fuel earnings
growth from FY15
 Overseas expansion in the Philippines has
kicked off
Non-banking cards. Management expects the volume of healthcare cards (also
smart IC cards) to increase to over 10m in 2015, from minimal volume last year.
Healthcare cards' ASP is slightly lower than that of banking cards while its margin
could be similar as that of banking cards given the usage of lower-cost domestic
chips.
Overseas market expansion. Management sees overseas expansion will add
additional profit to Goldpac in 2015-2016. The privatisation centre in the Philippines
will commence operations this month, according to management. The Philippine
Government aims to complete Europay, MasterCard and Visa EMV card migration by
2017. Orders in the Philippines are all quoted in CNY to avoid foreign exchange risks.
ASP in the Philippines is better than that in China. Goldpac believes its Philippine
business will be the gateway to the company's expansion in the South-East Asian
region.
What is the impact from rapid growth of mobile payment?
 Concern on threat from emerging mobile
payment and online payment is overdone
Some investors see the card payment industry as a sunset industry given the
anticipated impact of mobile payments substituting card payments in the long term.
Mobile payments have achieved a revolutionary breakthrough last year as Tencent
Holdings (700 HK, BUY, TP: HKD159) and Alipay utilise mobile applications like Didi
Dache and Kuraidi Dache to rapidly grow their user bases and increase the adoption
of their services in cities in China.
In Mar 2014, Alibaba (BABA US, NR) announced that it would roll out its first virtual
credit card in China (which it aims to do very soon) as a result of its co-operation with
China Citic Bank (998 HK, NR). On the same day, Tencent also announced that it will
team up with China Citic Bank to launch a virtual credit card on the WeChat platform.
Both Alibaba and Tencent plan to issue 1m virtual credit cards at the first stage.
However, in late Mar 2014, the PBOC halted barcode and virtual credit card
payments in China, mainly due to concerns over the security of verification
procedures. There are also talks about whether the Government is capping the
amount allowed for online and mobile payments to avoid payment fraud.
 Management does not see mobile payment
as threat as it believes card payment will
continue to be the mainstream
 Goldpac is well-positioned in the mobile
Regarding some recent discussions about mobile payment and card payment in
China, management does not see any negative impact from increasing e-payment or
online payment at this moment. Management reiterates its views as follow:
i.
Goldpac is ready in software-based payment technology including online
payment and mobile payment. The company has existing technological
know-how in near-field communication-single wire protocol (NFC-SWP)
payment. The value of transactions using credit cards is still growing in
China. Compared to card transactions, the scale of mobile payments is still
small in China. Goldpac has not identified any mainstream emerging
payment method yet. It sees higher potential in NFC payment (chip-based)
method in the long run given the higher security requirements.
ii.
According to the previous PBOC's announcement, China currently does not
allow the existence of virtual credit card. All online transactions are linked
with physical banking cards, either debit or credit. Goldpac believes there is
no material cannibalisation from mobile payment or online payment at the
current stage as card payment is still the mainstream.
iii.
Goldpac is open to acquire some mobile payment companies or third-party
payment companies in order to increase its own R&D capabilities in this
area. However, detailed merger and acquisition (M&A) direction has not
been decided yet.
payment field with existing technological
know-how in NFC-SWP payment
See important disclosures at the end of this report
3
Goldpac Group (3315 HK)
23 January 2015
Figure 1: Value of financial card transactions in China
Figure 2: Value of financial card, third-party and mobile
payment transactions in 2013
(CNYbn)
35.0
32
30.0
25.0
08-13 CAGR: 52%
21
Financial
card payment
CNY32trn
20.0
15
15.0
Third party
payment
CNY5.3trn
10
10.0
5.0
Mobile payment
CNY1trn
7
4
0.0
2008
2009
2010
2011
Source: PBOC
2012
2013
Source: PBOC, iResearch
How does Goldpac procure IC chips given chip cost is the largest cost
component of the company?
 NXP is still playing the dominating role in chip
supply
Gemalto procures IC chips from NXP Semiconductors (NXP) (NXPI US, NR) through
large-batch global procurement orders. Gemalto then resells IC chips to Goldpac at
cost. According to management, NXP is almost the monopoly supplier of IC chips for
banking cards with about 70-75% market share. Other domestic card manufacturers
usually order chips from NXP directly at relatively higher cost than the price Goldpac
procured from Gemalto. Chip cost accounts for 70% of Goldpac’s total cost of goods
sold (COGS).
Although Gemalto does not restrict Goldpac's IC chip procurement, most banks and
customers are encouraging the usage of NXP chips. As NXP's IC chip is better in
quality and price is fair, almost 90% of IC chips used by Goldpac are produced from
NXP now. Chinese chip manufacturers are ramping up but they still lag behind NXP
in terms of technology, product stability/quality and cost of production, among others.
They still rely on government subsidies at the current stage.
There are many reasons why NXP is the dominating player in the industry.
i. NXP owns almost all the patents in terms of production standards and product
specifications. It also works with banking card organisations (EMV, Visa, Master) in
setting up the chip standard in the early days. Chinese chip manufacturers like
Shanghai Fudan (1385 HK, NR), Huahong (Not listed) and Datong (600198 CH, NR)
need to develop production techniques and get certified by EMV Corp before they
can receive mass orders from card manufactures.
ii. NXP has product quality and economies of scale. Even if new players are able to
get certifications, it may take years for banks and card manufacturers like Goldpac to
test the product with small volume trial orders. Without economies of scale and
government subsidies right now, domestic chip manufacturers cannot compete with
NXP in ASP given their higher costs of production.
 Goldpac sees the ramp-up of domestic chip
supply as a positive to its margins
See important disclosures at the end of this report
Goldpac believes chip localisation is a long-term trend in China given the
Government's support in industry development. The company has been working with
all six domestic IC chip suppliers in product testing together with banks in small
batches since last year. Management estimate that the increasing usage of domestic
chips should slightly lower the company’s cost base and increase its gross margin as
domestic chips are currently selling at a discount to NXP's chips.
4
Goldpac Group (3315 HK)
23 January 2015
Why was the share price so weak recently?
Management sees several reasons behind the recent share price weakness.
 Goldpac believes the concern over PBOC 3.0
standard is overdone. Shipments since Dec
2014 have been robust
i.
Goldpac's pre-IPO investor, BOCI, placed shares in Nov 2014. There is
some lingering effect on the placement. This, coupled with a sector rotation
from small-mid sector to big-cap sector in early December, caused
Goldpac's share price to be vulnerable to the market selldown.
ii.
In 4Q13, the PBOC announced that all the banks should comply with the
new PBOC 3.0 standard by end of 1 Apr 2015. Goldpac saw slight volume
weakness in Nov 2014 as a result given that banks need to upgrade their IT
hardware to comply with the new standard.
There are market concerns that the new PBOC standard could cause delays of
shipments in 1Q15. Management clarified that PBOC 3.0 will not cause major delays
in shipments as banks can still choose to issue cards that comply with the PBOC 2.0
standard before Apr 2014. In fact, the company has seen both PBOC 3.0 orders and
PBOC 2.0 orders in the past few months. Following the temporary weakness in
shipment volume in November, the company has seen a strong pickup in volume in
Dec 2014 and much stronger orders in Jan 2015.
Management agrees with our view that shipment volume of cards will mainly be
driven by demand from consumers who apply for new cards. In fact, management
believes its strong card shipments and orderbook could be attributable to banks' card
promotion before the Chinese New Year. Management remains confident on the
shipment volume growth this year.
 Goldpac did not allow us to take photos in the
Figure 3: Goldpac's card board
production plants. We took photos at
Goldpac's entrance, where the company
showcased all the cards that the company
produced in the past
Source: RHB
Figure 4: Goldpac's card board
Source: RHB
See important disclosures at the end of this report
5
Goldpac Group (3315 HK)
23 January 2015
Earnings Revision
ASP revision
We slightly lower our ASP forecast for Goldpac. Management has guided for a 5-10%
decline in ASP for FY14-16 due to a sequential decline in chip cost. According to
management, IC chip selling price declined 10% in 2014, especially in 2H14, due to
increasing upstream competition and the lowering of ASP by NXP. Management
believes its ASP could decline further in 2015 due to a further decline in chip cost and
increasing batch purchasing of chip cards from banks in FY15.
We had previously expected chip card ASP to decline by 3% YoY and 2% YoY in
FY15 and FY16, respectively. We lower our ASP forecast by 3-6% for FY14-16,
anticipating YoY ASP declines of 12%/6%/4% in FY14/FY15/FY16 respectively.
Figure 5: Earnings revisions
FY14
Old
New
Volume (m cards)
160
ASP (CNY/card)
7.5
FY15
% YoY
Old
New
160
0%
290
7.3
-3%
7.3
24.0%
24.0%
0ppt
FY16
% YoY
Old
New
% YoY
290
0%
380
380
0%
6.9
-5%
7.0
6.6
-6%
25.0%
25.0%
0ppt
26.0%
26.0%
0ppt
Chip card assumptions
GP margin (%)
Revenue by segement (CNYm)
Cards
1,280
1,248
-3%
2,143
2,014
-6%
2,696
2,527
-6%
Personalisation services
161
161
0%
225
225
0%
270
270
0%
On-site card issuance
105
105
0%
111
111
0%
116
116
0%
1,546
1,514
-2%
2,478
2,349
-5%
3,082
2,913
-5%
Total
Financials (CNYm)
Revenue
1,546
1,514
-2%
2,478
2,349
-5%
3,082
2,913
-5%
Gross profit
448
440
-2%
695
660
-5%
877
833
-5%
EBIT
276
272
-1%
424
403
-5%
546
520
-5%
Net profit
227
224
-1%
362
344
-5%
471
449
-5%
Recurring net profit
257
254
-1%
379
361
-5%
481
459
-5%
EPS (Fen)
29.7
29.3
-1%
43.7
41.7
-5%
55.5
53.0
-5%
GP margin
29.0%
29.1%
0.1ppt
28.0%
28.1%
0.0ppt
28.4%
28.6%
0.1ppt
EBIT margin
17.8%
17.9%
0.1ppt
17.1%
17.1%
0.0ppt
17.7%
17.9%
0.1ppt
NP margin
14.7%
14.8%
0.1ppt
14.6%
14.6%
0.0ppt
15.3%
15.4%
0.1ppt
Recurring net margin
16.6%
16.8%
0.1ppt
15.3%
15.4%
0.1ppt
15.6%
15.8%
0.2ppt
Margins (%)
Source: RHB
Earnings estimates
We maintain our forecasts on volume and margins for FY14-16. Due to lower ASP
forecast for Goldpac in FY14-16, we revise down Goldpac's EPS by 1% for FY14 and
5% for FY15-16. We now expect Goldpac to deliver a recurring net profit growth of
139% YoY in 2H14 to CNY121m. We forecast a recurring EPS growth of 42% YoY
and 27% YoY for FY14 and FY15, respectively.
According to management, the company had cash inflow of CNY400m in December
as banks settle their payments before year-end. We expect year-end account
receivables level should be much lower than that in Jun 2014. Management also
mentioned that the company is considering share buyback or increasing its dividend
payout for 2014 to increase the return to shareholders. We currently forecast a 25%
dividend payout for Goldpac in FY14-16.
See important disclosures at the end of this report
6
Goldpac Group (3315 HK)
23 January 2015
Figure 6: P&L summary
(CNYm)
Turnover
Cost of sales
FY12
FY13
FY14F
FY15F
FY16F
1HFY13
2HFY13
1HFY14
677
1,112
1,514
2,349
2,913
540
572
822
2HFY14
692
(473)
(788)
(1,074)
(1,690)
(2,080)
(384)
(404)
(584)
(490)
Gross profit
203
324
440
660
833
156
168
239
201
Gross margin
30.1%
29.1%
29.1%
28.1%
28.6%
28.9%
29.4%
29.0%
29.1%
Other operating income
Selling expenses
% of turnover
Administrative expenses
% of turnover
R&D expenses
% of turnover
Total Opex
% opex of turnover
EBIT
EBIT margin
Finance income
Finance cost
7
22
30
46
58
(3)
25
24
5
(42)
(75)
(103)
(157)
(192)
(25)
(50)
(56)
(47)
6.8%
6.7%
6.6%
6.1%
6.8%
(14)
2.0%
(14)
1.3%
(29)
1.3%
(76)
(28)
1.2%
(32)
1.1%
4.7%
(6)
1.2%
(19)
8.7%
(8)
1.4%
(14)
1.7%
(6)
0.8%
(117)
(146)
5.0%
5.0%
(84)
(136)
(198)
(303)
(370)
(51)
(85)
(102)
(96)
12%
12%
13%
13%
13%
9%
15%
12%
14%
4.8%
(32)
6.8%
5.0%
3.6%
(27)
6.8%
4.2%
4.2%
(47)
(20)
3.9%
(43)
6.3%
127
210
272
403
520
102
108
161
111
19%
19%
18%
17%
18%
19%
19%
20%
16%
6
3
32
34
38
0
3
15
17
(7)
(2)
(1)
(1)
(1)
(1)
(2)
(0)
(1)
Share of after-tax loss of an associate
0
0
0
0
0
0
0
0
0
Other non-operating income/expenses
12
(27)
(30)
(17)
(10)
0
(27)
(12)
(18)
109
PBT
138
183
273
419
548
102
82
164
Tax
(23)
(43)
(49)
(75)
(99)
(20)
(22)
(42)
Effective tax rate (%)
Net profit
YoY growth (%)
Net margin
Recurring net profit
YoY growth (%)
16.6%
23.2%
18.0%
18.0%
18.0%
20.0%
27.2%
25.7%
(7)
6.4%
115
141
224
344
449
81
60
122
102
139.4%
22.3%
59.0%
53.6%
30.6%
70.4%
-11.7%
49.5%
71.9%
17.0%
12.7%
14.8%
14.6%
15.4%
15.0%
10.4%
14.8%
14.8%
103
168
254
361
459
67.8%
63.6%
51.0%
42.1%
27.3%
81
170.4%
87
128.9%
133
121
163.8%
138.9%
Source: Company data, RHB
See important disclosures at the end of this report
7
Goldpac Group (3315 HK)
23 January 2015
Valuation
Revising down TP to HKD8.90 from HKD9.50
We revise down our TP for Goldpac to HKD8.90 from HKD9.50 given our lower
estimate for Goldpac's FY15 EPS.
We value Goldpac at 17x P/E, applying our FY15F EPS forecast. 17x is on par with
its average 1-year forward P/E since listing.
Goldpac has no directly comparable peers listed in Hong Kong. All of its peers are
listed in China, ie Eastcompeace Technology (Eastcompeace) (002017 CH, NR),
Hengbao (002104 CH, NR) and Wuhan Tianyu Information Industry (Tianyu) (300205
CH, NR). Its strategic shareholder Gemalto is listed in the Netherlands.
Goldpac is now trading at 10x FY15F P/E, which is substantially below valuations of
its A-share listed peers and its strategic shareholder, Gemalto. In terms of share
price performance, Goldpac has substantially underperformed its A-share listed
peers. We forecast a recurring EPS growth of 42% YoY and 27% YoY for Goldpac in
FY14 and FY15, respectively. We believe the recent share price correction offers an
attractive BUY opportunity
A major risk to our call is ASP dropping faster than expected due to fluctuations in IC
chip market prices.
Figure 7: Goldpac’s forward P/E band
(HKD)
13
+2sd: 23x
12
11
+1sd: 19x
10
9
Mean: 17x
8
-1sd: 13x
7
6
-2sd: 10x
5
4
3
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Source: Bloomberg, RHB
Figure 8: Valuation comparison I
Company
Ticker
Goldpac
3315 HK
Hengbao
Tianyu
Price
Mkt cap
3m avg
t/o
EPS
3YR
Lcy
USDm
USDm
CAGR
3m
6m
14F
15F
14F
15F
14F
15F
14F
15F
(30.9)
(36.1)
13.8
9.7
2.1
1.8
15.1
20.3
1.7
2.5
%chg
P/E
P/BV
ROE
Div Yield
5.04
544
1.7
21.8
002104 CH
14.10
1,619
37.6
37.9
2.2
16.3
33.6
24.4
6.6
5.4
23.1
22.0
1.6
2.2
300205 CH
15.88
1,099
33.6
45.0
(8.3)
20.1
50.9
34.3
5.9
5.5
9.1
16.1
N/A
N/A
EastCompeace 002017 CH
14.88
691
12.3
N/A
(10.4)
11.2
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Gemalto
64.87
6,619
27.4
16.3
2.9
(12.5)
19.5
15.8
2.4
2.2
12.2
14.0
0.6
0.7
34.7
24.8
5.0
4.4
14.8
17.4
1.1
1.5
GTO NA
Average
Source: Company data, RHB
See important disclosures at the end of this report
8
Goldpac Group (3315 HK)
23 January 2015
Financial Exhibits
Profit & Loss (CNYm)
Dec-12
Dec-13
Dec-14F
Dec-15F
Total turnover
677
1,112
1,514
2,349
Dec-16F
2,913
Cost of sales
(473)
(788)
(1,074)
(1,690)
(2,080)
Gross profit
203
324
440
660
Gen & admin expenses
(14)
(14)
(20)
(28)
(32)
Selling expenses
(42)
(75)
(103)
(157)
(192)
833
Other operating costs
(21)
(25)
(46)
(71)
(88)
Operating profit
127
210
272
403
520
Operating EBITDA
142
228
299
446
577
Depreciation of fixed assets
(16)
(18)
(27)
(43)
(56)
Amortisation of intangible assets
-
-
-
-
Operating EBIT
127
210
272
403
520
38
(0)
Interest income
6
3
32
34
Interest expense
(7)
(2)
(1)
(1)
(1)
Exceptional income - net
12
(12)
(30)
(17)
(10)
Other non-recurring income
-
(16)
-
-
-
Pre-tax profit
138
183
273
419
548
Taxation
(23)
(43)
(49)
(75)
(99)
Profit after tax & minorities
115
141
224
344
449
Reported net profit
115
141
224
344
449
Recurring net profit
103
168
254
361
459
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
127
210
272
403
520
16
18
27
43
56
102
(81)
86
54
84
1
(12)
(30)
(17)
(10)
245
135
355
483
651
6
3
32
34
38
(7)
(2)
(1)
(1)
(1)
Tax paid
(12)
(31)
(49)
(75)
(99)
Cash flow from operations
232
105
337
441
590
Capex
(30)
(50)
(200)
(200)
(150)
Source: Company data, RHB
Cash flow (CNYm)
Operating profit
Depreciation & amortisation
Change in working capital
Other operating cash flow
Operating cash flow
Interest received
Interest paid
Other investing cash flow
(1)
(706)
Cash flow from investing activities
(31)
(756)
(200)
(200)
(150)
Dividends paid
(39)
(101)
(56)
(86)
(112)
Proceeds from issue of shares
-
-
-
-
(22)
-
-
-
(0)
-
-
(56)
(86)
(112)
Increase in debt
Other financing cash flow
Cash flow from financing activities
1,125
(142)
(181)
1,002
-
-
-
-
Cash at beginning of period
22
42
394
475
630
Total cash generated
20
352
81
155
328
Forex effects
(0)
Implied cash at end of period
42
0
394
-
-
-
475
630
958
Source: Company data, RHB
See important disclosures at the end of this report
9
Goldpac Group (3315 HK)
23 January 2015
Financial Exhibits
Balance Sheet (CNYm)
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
Total cash and equivalents
279
1,324
1,405
1,560
1,888
Inventories
146
272
348
552
554
Accounts receivable
189
206
394
470
554
Total current assets
613
1,802
2,147
2,583
2,995
95
126
299
456
549
18
18
18
18
95
144
317
474
567
708
1,946
2,464
3,056
3,563
37
15
15
15
15
421
498
848
1,183
1,352
Tangible fixed assets
Intangible assets
Total non-current assets
Total assets
Short-term debt
Accounts payable
Other current liabilities
-
31
28
28
28
28
488
541
891
1,226
1,395
Other liabilities
6
8
8
8
8
Total non-current liabilities
6
8
8
8
8
494
549
899
1,233
1,403
Total current liabilities
Total liabilities
Share capital
0
1
1
1
1
Other reserves
213
1,396
1,564
1,822
2,159
Shareholders' equity
213
1,397
1,565
1,823
2,160
Total equity
213
1,397
1,565
1,823
2,160
Total liabilities & equity
708
1,946
2,464
3,056
3,563
Source: Company data, RHB
Key Ratios (CNY)
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
Revenue growth (%)
52.3
64.4
36.1
55.2
24.0
Operating profit growth (%)
68.0
65.3
29.6
48.3
29.2
Net profit growth (%)
139.4
22.3
59.0
53.6
30.6
EPS growth (%)
139.4
9.6
4.5
53.6
30.6
Bv per share growth (%)
45.2
525.9
(28.1)
16.5
18.5
Operating margin (%)
18.7
18.8
17.9
17.1
17.9
Net profit margin (%)
17.0
12.7
14.8
14.6
15.4
Return on average assets (%)
18.7
10.6
10.2
12.5
13.6
Return on average equity (%)
63.9
17.5
15.1
20.3
22.6
(113.1)
(93.7)
(88.8)
(84.8)
(86.7)
DPS
0.10
0.17
0.07
0.10
0.14
Recurrent cash flow per share
0.45
0.19
0.39
0.51
0.68
Net debt to equity (%)
Source: Company data, RHB
See important disclosures at the end of this report
10
Goldpac Group (3315 HK)
23 January 2015
SWOT Analysis
 The only financial card supplier in China certified by
six leading payment card organisations
 Slower-thanexpected
financial card
growth in China
after 2016
 R&D capabilities in securities management and new
payment technologies
 Long-standing relationships with clients in China
 Overseas
expansion slows
due to local
regulations
 Financial card
migration in
China may
boost the
growth of smart
card shipments
 Lower
penetration of
financial cards
in China
compared to
other developed
countries
 Overseas M&As
 ASP is likely to decline due to cheaper input of IC
chips
P/E (x) vs EPS growth
P/BV (x) vs ROAE
124%
12.0
53%
30
107%
10.0
44%
25
89%
20
71%
8.0
35%
6.0
26%
36%
4.0
18%
5
18%
2.0
9%
0
0%
0.0
0%
15
53%
P/E (x) (lhs)
Jan-16
Jan-15
Jan-14
Jan-13
Jan-12
10
EPS growth (rhs)
Source: Company data, RHB
P/B (x) (lhs)
Jan-16
61%
35
Jan-15
70%
14.0
Jan-14
16.0
142%
Jan-13
160%
40
Jan-12
45
Return on average equity (rhs)
Source: Company data, RHB
Company Profile
Goldpac supplies and distributes financial cards, card personalization services, on-side card insurance system solutions, magnetic strip
cards and smart cards in China, Hong Kong and Macao.
See important disclosures at the end of this report
11
Goldpac Group (3315 HK)
23 January 2015
Recommendation Chart
Price Close
Recommendations & Target Price
9.50
na
10.60
9.60
8.60
7.60
6.60
5.60
Buy
4.60
Dec-13
Neutral
Sell
Mar-14
Trading
Buy
Jul-14
Take Profit
Not Rated
Nov-14
Source: RHB, Bloomberg
Date
Recommendation
Target Price
Price
2014-11-12
Buy
7.51
9.50
Source: RHB, Bloomberg
See important disclosures at the end of this report
12
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Take Profit: Target price has been attained. Look to accumulate at lower levels
Sell: Share price may fall by more than 10% over the next 12 months
Not Rated: Stock is not within regular research coverage
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