GHLSYS (0021) - GHL Systems Bhd - Expecting a good pay-off
Target RM1.11 (Stock Rating: ADD)
We left our recent meeting with GHL feeling confident about the group’s prospects, which will be driven by credit card Transaction Payment Acquisition (TPA) contribution in FY15 and better traction in ePay services. Management highlighted that FY15 will be a key year for GHL given that it will start credit card TPA in Malaysia and non-bank TPA in the Philippines. We maintain our FY15-17 EPS forecasts and Add call, with an unchanged target price of RM1.11, based on 23.8x CY16 P/E (40% premium over the payment sector average in view of GHL’s strong FY13-16 EPS CAGR of 78%). Stronger TPA earnings and M&A activities in new markets are potential re-rating catalysts. GHL is our top pick in the domestic tech sector.
What Happened
We hosted 10 buyside analysts and fund managers last week for a meeting with GHL. The company was represented by group CEO Mr Kanagaraj Lorenz. Management discussed GHL’s earnings drivers following its 4Q14 results and outlook for FY15. In addition, management shared about GHL’s risk underwriting capability that allows it to embark on the credit card TPA business. It also plans to grow TPA activities with three potential banking partners in Malaysia and the Philippines this year. Management expects to secure a partnership with major Malaysian bank in 1H15. GHL is positive about the Bank Negara Malaysia (BNM) ruling to impose caps on interchange fees as this is expected to encourage more merchants to embrace e-payments given that it will effectively lower merchant discount rates (MDR) immediately.
What We Think
While there were no surprises from the meeting, we were encouraged to learn that TPA-driven activities in Malaysia and the Philippines are still on track to start in 2Q15 following the completion of back-end network integration with its partners. We expect GHL to acquire a monthly average of 500 merchants in Malaysia this year, in line with its monthly target of 300-500 merchants. Apart from that, we see the reduction in interchange fees as positive for GHL because it provides more opportunities given that it is not economical for the banks to fulfil the 800k point-of-sales (POS) terminals target set by BNM. Moreover, merchant acquirers like GHL can still earn lucrative income as they do not necessarily need to reduce spreads from the MDR.
What You Should Do
Accumulate GHL. Overall, we think that GHL’s growth prospects are intact and we are still confident about its execution strategy.
Source: CIMB Daybreak - 09 March 2015
Target RM1.11 (Stock Rating: ADD)
We left our recent meeting with GHL feeling confident about the group’s prospects, which will be driven by credit card Transaction Payment Acquisition (TPA) contribution in FY15 and better traction in ePay services. Management highlighted that FY15 will be a key year for GHL given that it will start credit card TPA in Malaysia and non-bank TPA in the Philippines. We maintain our FY15-17 EPS forecasts and Add call, with an unchanged target price of RM1.11, based on 23.8x CY16 P/E (40% premium over the payment sector average in view of GHL’s strong FY13-16 EPS CAGR of 78%). Stronger TPA earnings and M&A activities in new markets are potential re-rating catalysts. GHL is our top pick in the domestic tech sector.
What Happened
We hosted 10 buyside analysts and fund managers last week for a meeting with GHL. The company was represented by group CEO Mr Kanagaraj Lorenz. Management discussed GHL’s earnings drivers following its 4Q14 results and outlook for FY15. In addition, management shared about GHL’s risk underwriting capability that allows it to embark on the credit card TPA business. It also plans to grow TPA activities with three potential banking partners in Malaysia and the Philippines this year. Management expects to secure a partnership with major Malaysian bank in 1H15. GHL is positive about the Bank Negara Malaysia (BNM) ruling to impose caps on interchange fees as this is expected to encourage more merchants to embrace e-payments given that it will effectively lower merchant discount rates (MDR) immediately.
What We Think
While there were no surprises from the meeting, we were encouraged to learn that TPA-driven activities in Malaysia and the Philippines are still on track to start in 2Q15 following the completion of back-end network integration with its partners. We expect GHL to acquire a monthly average of 500 merchants in Malaysia this year, in line with its monthly target of 300-500 merchants. Apart from that, we see the reduction in interchange fees as positive for GHL because it provides more opportunities given that it is not economical for the banks to fulfil the 800k point-of-sales (POS) terminals target set by BNM. Moreover, merchant acquirers like GHL can still earn lucrative income as they do not necessarily need to reduce spreads from the MDR.
What You Should Do
Accumulate GHL. Overall, we think that GHL’s growth prospects are intact and we are still confident about its execution strategy.
Source: CIMB Daybreak - 09 March 2015
