GHLSYS (0021) - GHL Systems Bhd - Boost from new TPA partner
Target RM1.45 (Stock Rating: ADD)
GHL signed an agreement with CIMB Bank for a transaction payment acquisition (TPA) arrangement in Malaysia. The partnership is positive for GHL as it facilitates the merchant acquisition process, given that CIMB has wide population network reach, especially in Malaysia and ASEAN. We see this partnership a positive catalyst for the stock. We expect GHL to derive stronger earnings from terminal rental and merchant discount rates in 2HFY15 onwards. Maintain Add and target price of RM1.45, based on 27.8x CY16 P/E (40% premium over payment sector average P/E of 20x in view of GHL’s strong FY14-16 EPS CAGR of 85%). Stronger TPA earnings and M&As in new markets are potential re-rating catalysts.
What Happened
GHL announced that it has signed an agreement with CIMB Bank Bhd to acquire merchants under the TPA arrangement. This marks the group’s first TPA partnership with a Malaysian-based bank. Management expects to start deploying the point-of-sales (POS) terminals in May 2015. GHL targets to sign 3,000-4,000 merchants for this TPA under its initial rollout plan in 2015. GHL expects two revenue streams from: 1) terminal rental of about RM50/month, and 2) merchant discount rates from credit and debit card transactions at the merchants that have signed up with GHL. In addition, it will also offer e-Pay services to the merchants as value-added services.
What We Think
We are not surprised by the news, as management had earlier indicated that the group expected to sign with two banking partners in Malaysia this year. Therefore, we are encouraged to learn that GHL has finally secured the second TPA partnership and it can immediately begin the merchant acquisition process. We see the partnership with CIMB is more significant than the earlier TPA with HSBC given the former bank stronger branding profile in facilitating the merchant acquisition process and wide population network reach especially in Malaysia. Moreover, we also understand that GHL expects minimal integration period for the new TPA, given that it has already set up and integrate the payment network with CIMB.
What You Should Do
Accumulate GHL. Overall, we think that GHL’s earnings growth prospects are intact and we are still confident on its execution strategy. GHL is our top pick for the domestic technology sector. We will closely follow its Malaysian credit card transaction payment acquisition (TPA) performance in 3Q15 onwards.
Source: CIMB Daybreak - 24 April 2015
Target RM1.45 (Stock Rating: ADD)
GHL signed an agreement with CIMB Bank for a transaction payment acquisition (TPA) arrangement in Malaysia. The partnership is positive for GHL as it facilitates the merchant acquisition process, given that CIMB has wide population network reach, especially in Malaysia and ASEAN. We see this partnership a positive catalyst for the stock. We expect GHL to derive stronger earnings from terminal rental and merchant discount rates in 2HFY15 onwards. Maintain Add and target price of RM1.45, based on 27.8x CY16 P/E (40% premium over payment sector average P/E of 20x in view of GHL’s strong FY14-16 EPS CAGR of 85%). Stronger TPA earnings and M&As in new markets are potential re-rating catalysts.
What Happened
GHL announced that it has signed an agreement with CIMB Bank Bhd to acquire merchants under the TPA arrangement. This marks the group’s first TPA partnership with a Malaysian-based bank. Management expects to start deploying the point-of-sales (POS) terminals in May 2015. GHL targets to sign 3,000-4,000 merchants for this TPA under its initial rollout plan in 2015. GHL expects two revenue streams from: 1) terminal rental of about RM50/month, and 2) merchant discount rates from credit and debit card transactions at the merchants that have signed up with GHL. In addition, it will also offer e-Pay services to the merchants as value-added services.
What We Think
We are not surprised by the news, as management had earlier indicated that the group expected to sign with two banking partners in Malaysia this year. Therefore, we are encouraged to learn that GHL has finally secured the second TPA partnership and it can immediately begin the merchant acquisition process. We see the partnership with CIMB is more significant than the earlier TPA with HSBC given the former bank stronger branding profile in facilitating the merchant acquisition process and wide population network reach especially in Malaysia. Moreover, we also understand that GHL expects minimal integration period for the new TPA, given that it has already set up and integrate the payment network with CIMB.
What You Should Do
Accumulate GHL. Overall, we think that GHL’s earnings growth prospects are intact and we are still confident on its execution strategy. GHL is our top pick for the domestic technology sector. We will closely follow its Malaysian credit card transaction payment acquisition (TPA) performance in 3Q15 onwards.
Source: CIMB Daybreak - 24 April 2015
