PAX entered into a framework agreement to sell POS terminals to HiSun (00818.HK; NR) on 19Dec 2012. The total values are capped atHK$330mn/H K$600mn/H K$700mn for 2013/14/15E. Back in Apr 2012, thefirst time that PAX enter into an agreement to sell its POS terminals to HiSun with total value capped at HK$130mn. However, in 2012E, sales to HiSun are expected to be minimal as the Company only started selling its POSproducts since Aug 2012E. The agreement is believed to help PAX benefitfrom the increasing demand for POS terminals in the growing mobilepayment services market in China, going forward.

Stringent cost control is expected to alleviate ASP pressure. In 2012E,overall ASP is forecast to decline ~10% YoY due to intensifying competition.However, stringent cost control for its major products will help its grossmargin to remain stable during the period.

Strong position in the domestic 3rd party payment market. We projectPAX to maintain its 40% market share in the sales of POS terminals to thedomestic 3rd party payment market in 2012E. Meanwhile, sales volume forPOS in the 3rd party payment market is forecast to more than double to~500-600k in 2012E(一200k in 2011).

Shortlisted by CCB as POS terminal supplier. After being shortlisted byUMS as one of the suppliers for providing POS terminals on l Nov 2012,China Construction Bank also shortlisted PAX once again on 28Nov 2012(cooperation since 2006). Other than the China market, the Company willcontinue to put more effrt in future overseas expansion. PAX has beenaggressive in monitoring its AR since 2H12E. As such, cash flow willimprove by end-2012E. With an estimated 2012E net cash of HK$1.15/share(vs. HK$0.9/share in lH12), we maintain our BUY rating with an unchangedTP of HK$2.30.

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