GHLSYS (0021) : GHL Systems Bhd - Securing Philippines TPA
Target RM1.00 (Stock Rating: ADD)
GHL announced that it has signed an agreement for a prepaid card TPA arrangement in the Philippines. Omnipay, Inc. has appointed GHL to acquire merchants for UnionPay International and JCB International. This marks GHL’s entry into the direct merchant acquisition space, consolidating its position as the leading payment services provider in the Philippines. We maintain our FY14-17 EPS forecasts and reiterate our Add call and RM1.00 target price, still based on 23.8x CY16 P/E, 40% premium to the payment sector average, in view of its strong FY13-16 EPS CAGR of 72% and attractive PEG of 0.57x. Stronger TPA earnings and M&A activities in new markets are potential catalysts. GHL is our top pick in the domestic technology sector.
What Happened
GHL announced that its subsidiary, GHL Philippines, has signed an agreement with Omnipay, Inc. to acquire merchants under a Transaction Payment Acquisition (TPA) arrangement. Under the agreement, GHL will serve as a merchant acquirer for UnionPay International and JCB International cards in the Philippines. The company expects to start deploying its point-of-sales (POS) terminals in 1Q15, and is targeting to sign up 300-500 merchants per month to accept payments using UnionPay and JCB cards. Also, the management is still confident of securing its TPA arrangement in Malaysia this year.
What We Think
We are positively surprised by GHL’s appointment as a TPA acquirer for UnionPay and JCB in the Philippines, as we were expecting a TPA arrangement with a bank which is still awaiting regulatory approval. Nevertheless, we believe this will help GHL to kick-start its TPA operations in the Philippines. We understand that about 65% of the country’s population is not covered by the banking system, which explains the 27m prepaid card issuances vs. only 8m credit cards. This is positive for GHL as UnionPay and JCB cards are predominantly used for making prepaid payments in the Philippines. Moreover, Omnipay plans to issue 6m-8m cards under the UnionPay and JCB brands in 2015, vs. 2.7m currently; this should help GHL’s merchant acquiring process.
What You Should Do
Accumulate. The stock had a good run early this year, but is now down 35% from its year-high of RM0.91. We think the pullback offers an attractive buying opportunity, in view of its strong TPA-driven earnings growth. Overall, we think GHL’s growth prospect is intact and are confident of its execution strategy.
Source: CIMB Daybreak - 17 December 2014
Target RM1.00 (Stock Rating: ADD)
GHL announced that it has signed an agreement for a prepaid card TPA arrangement in the Philippines. Omnipay, Inc. has appointed GHL to acquire merchants for UnionPay International and JCB International. This marks GHL’s entry into the direct merchant acquisition space, consolidating its position as the leading payment services provider in the Philippines. We maintain our FY14-17 EPS forecasts and reiterate our Add call and RM1.00 target price, still based on 23.8x CY16 P/E, 40% premium to the payment sector average, in view of its strong FY13-16 EPS CAGR of 72% and attractive PEG of 0.57x. Stronger TPA earnings and M&A activities in new markets are potential catalysts. GHL is our top pick in the domestic technology sector.
What Happened
GHL announced that its subsidiary, GHL Philippines, has signed an agreement with Omnipay, Inc. to acquire merchants under a Transaction Payment Acquisition (TPA) arrangement. Under the agreement, GHL will serve as a merchant acquirer for UnionPay International and JCB International cards in the Philippines. The company expects to start deploying its point-of-sales (POS) terminals in 1Q15, and is targeting to sign up 300-500 merchants per month to accept payments using UnionPay and JCB cards. Also, the management is still confident of securing its TPA arrangement in Malaysia this year.
What We Think
We are positively surprised by GHL’s appointment as a TPA acquirer for UnionPay and JCB in the Philippines, as we were expecting a TPA arrangement with a bank which is still awaiting regulatory approval. Nevertheless, we believe this will help GHL to kick-start its TPA operations in the Philippines. We understand that about 65% of the country’s population is not covered by the banking system, which explains the 27m prepaid card issuances vs. only 8m credit cards. This is positive for GHL as UnionPay and JCB cards are predominantly used for making prepaid payments in the Philippines. Moreover, Omnipay plans to issue 6m-8m cards under the UnionPay and JCB brands in 2015, vs. 2.7m currently; this should help GHL’s merchant acquiring process.
What You Should Do
Accumulate. The stock had a good run early this year, but is now down 35% from its year-high of RM0.91. We think the pullback offers an attractive buying opportunity, in view of its strong TPA-driven earnings growth. Overall, we think GHL’s growth prospect is intact and are confident of its execution strategy.
Source: CIMB Daybreak - 17 December 2014
