• GHL is partnering with Split to offer ‘Buy-Now-Pay-Later’ (BNPL) for its merchants in Malaysia. GHLS’s merchants are now able to offer customers 3-month interest-free instalments via debit or credit card.

• We are positive over GHL partnership with Split’s BNPL as it has unlocked another earnings growth potential for GHL through the capture of higher transaction processing value (TPV) expected in the near-term.

• Maintain BUY with a DCF-derived TP of RM2.15 TP. We believe the decline in GHL’s share price now offers a good-entry level as its long-term growth potential remains attractive underpinned by surge in demand for digital payment ecosystem.

GHL enabling instalment payments with debit/credit card

GHL through its partnership with Split - a financial technology (fintech) company will be piloting a new service called ‘Buy-Now-Pay-Later’ (BNPL) for its merchants in Malaysia. Under BNPL, GHLS’s merchants are now able to offer customers the choice of up to 3-month interest-free instalments via debit or credit card from any local bank. Management guided that GHL will start its pilot programme for BNPL by the end of 1Q21 at selected offline merchants.

Fraud risk-free to GHL

Split will undertake a risk assessment process (i.e. background and credit check) through the creation of customer’s account (for first-time user). This is to ensure the eligibility of customers to enjoy the instalment payment term option and mitigate any fraud risk. Meanwhile, the service is fraud risk-free to GHL as the merchants will receive the full purchase amount from Split once the first instalment is made by customers.

Another earnings growth potential unlocked

We are positive over GHL partnership with Split’s BNPL as it has unlocked another earnings growth potential for GHL through the capture of higher transaction processing value (TPV) expected in the near-term under its transaction payment acquisition (TPA) business. The instalment payment term option will help customers to have flexibility in making big-purchase spending while managing their cash flow. We see the initiative taken through GHL-BNPL as a prudent move and would benefit both merchants to achieve higher sales as well as helping customers with their needs given the impact of Covid-19 pandemic on many household incomes.

Maintain BUY with TP of RM2.15

Maintain BUY with a DCF-derived TP of RM2.15 (WACC: 9%, terminal growth rate: 3%), implying 2021/2022F PE of 58x/37x. We believe the weak GHL’s share price now offers a good entry level as its long-term growth potential remains attractive while fundamentals are underpinned by surge in demand for digital payment ecosystem.

Source: BIMB Securities Research - 23 Mar 2021