GHLSYS (0021) - GHL Systems Bhd - Payment reforms beneficiary
Target RM1.10 (Stock Rating: ADD)
Starbizweek reported that BNM has already started the implementation of its payment card reform framework in Jan 15 as part of its strategy to promote the usage of debit cards and reduce cash transactions in the country. We believe this is positive for GH, given BNM’s target to increase the point-of-sales (POS) terminals in the country from 220k now to 800k by 2020. Maintain Add, with an unchanged target price of RM1.10, based on 23.8x CY16 P/E (at 40% premium over the payment sector average in view of GHL’s strong FY13-16 EPS CAGR of 76% and attractive PEG of 0.75x). Stronger TPA earnings and M&A activities in new markets are potential re-rating catalysts. GHL is our top pick in the domestic technology sector.
What Happened
According to an article in Starbizweek on Saturday, BNM started to implement its payment card reform framework in Jan 15, with the introduction of interchange fee ceilings for domestic and international debit card and credit card transactions. We understand that the interchange fees for debit cards will immediately drop from 100bp to 15bp for domestic and 21bp for international transactions. Meanwhile, the interchange fees for credit card transactions will be capped at 110bp, below the average of 120bp currently. BNM expects the reduction in interchange fees will encourage smaller merchants to accept payment cards, as it could increase their sales to local consumers and tourists.
What We Think
In our view, BNM’s plan to raise POS terminals from 220k now to 800k by 2020 bodes well for GHL, as it could increase its POS terminals in the country through its merchant acquisitions strategy. In addition, we believe its partnership with Global Payment Malaysia as payment facilitator and service provider paves the way for GHL to capture the underserved small, medium and micro-businesses. The reduction in interchange fees is also positive for GHL because this will encourage more merchants to embrace e-payments as it will be cheaper. This also provides bigger market potential for GHL since it is not economical for the banks to fulfill the 800k POS terminals with lower interchange fees. Moreover, merchant acquirers like GHL can still earn lucrative income since it does not necessarily need to reduce its spread from the merchant discount rates. BNM expects debit card transactions to rise from 70m currently to 1.0bn by 2020, following the increase in POS terminal deployment.
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 - 16 February 2015
Target RM1.10 (Stock Rating: ADD)
Starbizweek reported that BNM has already started the implementation of its payment card reform framework in Jan 15 as part of its strategy to promote the usage of debit cards and reduce cash transactions in the country. We believe this is positive for GH, given BNM’s target to increase the point-of-sales (POS) terminals in the country from 220k now to 800k by 2020. Maintain Add, with an unchanged target price of RM1.10, based on 23.8x CY16 P/E (at 40% premium over the payment sector average in view of GHL’s strong FY13-16 EPS CAGR of 76% and attractive PEG of 0.75x). Stronger TPA earnings and M&A activities in new markets are potential re-rating catalysts. GHL is our top pick in the domestic technology sector.
What Happened
According to an article in Starbizweek on Saturday, BNM started to implement its payment card reform framework in Jan 15, with the introduction of interchange fee ceilings for domestic and international debit card and credit card transactions. We understand that the interchange fees for debit cards will immediately drop from 100bp to 15bp for domestic and 21bp for international transactions. Meanwhile, the interchange fees for credit card transactions will be capped at 110bp, below the average of 120bp currently. BNM expects the reduction in interchange fees will encourage smaller merchants to accept payment cards, as it could increase their sales to local consumers and tourists.
What We Think
In our view, BNM’s plan to raise POS terminals from 220k now to 800k by 2020 bodes well for GHL, as it could increase its POS terminals in the country through its merchant acquisitions strategy. In addition, we believe its partnership with Global Payment Malaysia as payment facilitator and service provider paves the way for GHL to capture the underserved small, medium and micro-businesses. The reduction in interchange fees is also positive for GHL because this will encourage more merchants to embrace e-payments as it will be cheaper. This also provides bigger market potential for GHL since it is not economical for the banks to fulfill the 800k POS terminals with lower interchange fees. Moreover, merchant acquirers like GHL can still earn lucrative income since it does not necessarily need to reduce its spread from the merchant discount rates. BNM expects debit card transactions to rise from 70m currently to 1.0bn by 2020, following the increase in POS terminal deployment.
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 - 16 February 2015
