Ark's popular card transfer card (ARKF currently holds 12.8 million shares with a market capitalization of about HK $900m) will report results for the fourth quarter and the full year ended December 31, 2020 after Hong Kong shares closed on March 25. For this financial report, the main background and concerns are as follows:

1) the one-stop payment service was hit by the epidemic in the first half of the year and will recover strongly in the second half of the year.

2) Marketing services increased tenfold in the first half of the year, what is the momentum in the second half of the year?

3) Financial forecast, valuation level?

I. strong recovery of payment business

As the card-shifting payment business mainly serves the transaction links of offline small and medium-sized merchants, the payment business was greatly affected by the epidemic in the first half of 2020. The total payment transaction volume of the company fell 16% in the first half of 2020 compared with the same period last year, and the revenue of one-stop payment business fell 11%.

The payment business recovered strongly in the second half of the year. As of October, the number of active payment service customers has returned to its pre-epidemic volume, and the number of consumers covered by payment services has reached nearly 600 million. and continued to maintain quarter-on-quarter growth; the number of transactions of application-based payment services increased by 30% from July to October compared with the first half of 2020.

Anxin International expects the total payment transaction volume of mobile cards to reach 912 billion yuan in the second half of 2020, an increase of 23 percent over the same period last year, and payment business revenue will reach 1.39 billion yuan, an increase of 28 percent over the same period last year.

Second, can the growth of marketing revenue exceed expectations again?

Technology-enabled business services were the main driving force for the company's performance growth in the first half of 2020, with revenue growing by 5.4 times year-on-year, with marketing services as the main engine, with revenue growing 11.8 times and gross profit 3.5 times year-on-year.

According to the company's disclosure, the exposure of the advertising precision marketing platform business has nearly doubled from July to October compared with the first half of 2020, based on which it is speculated that the month-on-month growth rate of marketing revenue is expected to exceed 100%.

III. Financial forecast

According to Bloomberg's consensus forecast, 2020 mobile card revenue is about 2.64 billion yuan, + 16% for the whole year, meaning an increase of 26.7% in the second half of the year compared with the same period last year.

The adjusted net profit in 2020 was 358 million yuan, + 18% for the whole year, and 35% in the second half of the year compared with the same period last year. The static PE is 72 times.

At present, nine analysts give the card a "buy" rating, and one analyst recommends holding it, with a consistent target price of HK $75 and the current price of HK $70.2.

Anxin International predicts that in 2021 and 2022, the adjusted net profit of the card will be 527 million and 693 million yuan, corresponding to 49 times and 37 times of the current market capitalization PE.