GHLSYS (0021) - GHL Systems Bhd - Securing Malaysian TPA
Target RM1.00 (Stock Rating: ADD)
GHL has signed an agreement with Global Payments for a TPA arrangement in Malaysia. This marks its entry into the direct merchant acquisition space, consolidating its position as the nation’s leading payment services provider. With this, we expect GHL to derive stronger earnings from terminal rental and merchant discount rates. Despite the delay in finalising the agreement, we maintain our FY14-16 EPS forecasts and reiterate our Add call and target price, still based on 23.8x CY16 P/E (40% premium to the payment sector average), in view of GHL’s strong FY13-16 EPS CAGR of 72% and attractive PEG of 0.7x. 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 subsidiaries, GHL Cardpay and GHL Epayments, have signed an agreement with Global Payments Malaysia (GPM) to acquire merchants under a Transaction Payment Acquisition (TPA) arrangement. Under the agreement, GHL will acquire new merchants for GPM by providing sales, marketing and on-boarding services. GHL will also facilitate transaction and fund settlements between GPM and the new merchants. The company expects to start deploying its point-of-sales (POS) terminals in 2Q15, and targets to sign up 3,000-4,000 merchants as an initial rollout plan in 2015. Separately, its Philippines TPA development is still on track; management expects a full POS rollout in Mar 15 upon completion of back-end integration.
What We Think
Although the Malaysia TPA announcement did not come as a complete surprise, it was nevertheless a relief that GHL has finally secured the agreement after recent delays. We understand that given GPM’s partnership with HSBC Bank Malaysia, the bank will act as a local clearinghouse for the payment transaction as required by Bank Negara. Thus, GHL can officially begin its merchant acquisition process and start generating revenue from merchant discount rates and terminal rental from the smaller third- and fourth-tier merchants. We project that 10,000 merchants will sign up for its TPA service in 2015 mainly driven from Malaysia and the Philippines which is expected to reach over 9,000 merchants, while we see minimal growth from Thailand given the uncertainty surrounding the country’s political environment.
What You Should Do
Accumulate the stock. Overall, we think GHL’s growth prospect is intact and we remain confident of its execution strategy.
Source: CIMB Daybreak - 28 January 2015
Target RM1.00 (Stock Rating: ADD)
GHL has signed an agreement with Global Payments for a TPA arrangement in Malaysia. This marks its entry into the direct merchant acquisition space, consolidating its position as the nation’s leading payment services provider. With this, we expect GHL to derive stronger earnings from terminal rental and merchant discount rates. Despite the delay in finalising the agreement, we maintain our FY14-16 EPS forecasts and reiterate our Add call and target price, still based on 23.8x CY16 P/E (40% premium to the payment sector average), in view of GHL’s strong FY13-16 EPS CAGR of 72% and attractive PEG of 0.7x. 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 subsidiaries, GHL Cardpay and GHL Epayments, have signed an agreement with Global Payments Malaysia (GPM) to acquire merchants under a Transaction Payment Acquisition (TPA) arrangement. Under the agreement, GHL will acquire new merchants for GPM by providing sales, marketing and on-boarding services. GHL will also facilitate transaction and fund settlements between GPM and the new merchants. The company expects to start deploying its point-of-sales (POS) terminals in 2Q15, and targets to sign up 3,000-4,000 merchants as an initial rollout plan in 2015. Separately, its Philippines TPA development is still on track; management expects a full POS rollout in Mar 15 upon completion of back-end integration.
What We Think
Although the Malaysia TPA announcement did not come as a complete surprise, it was nevertheless a relief that GHL has finally secured the agreement after recent delays. We understand that given GPM’s partnership with HSBC Bank Malaysia, the bank will act as a local clearinghouse for the payment transaction as required by Bank Negara. Thus, GHL can officially begin its merchant acquisition process and start generating revenue from merchant discount rates and terminal rental from the smaller third- and fourth-tier merchants. We project that 10,000 merchants will sign up for its TPA service in 2015 mainly driven from Malaysia and the Philippines which is expected to reach over 9,000 merchants, while we see minimal growth from Thailand given the uncertainty surrounding the country’s political environment.
What You Should Do
Accumulate the stock. Overall, we think GHL’s growth prospect is intact and we remain confident of its execution strategy.
Source: CIMB Daybreak - 28 January 2015
