• Overview. GHL System Berhad (GHL) 3Q22 core profit jumped by  32.9% YoY and 58.6% QoQ to RM8mn led by higher contribution from transaction payment acquisition (TPA) business and Shared services due to better consumer spending and higher EDC hardware sales.

• Key Highlight: As of 3Q22, GHL’s overall payment touchpoints grew by 5% YoY to 416,300, whilst TPA touchpoints stood at 181,700, up by 10% YoY. This is in tandem with GHL’s strategy to grow and strengthen its footprint regionally.

• Against Estimates: Inline. GHL’s 9M22 core earnings fell by 10.4% to  RM18.4mn however despite reporting higher revenue no thanks to deterioration in gross profit margin by business pillar, payment type,  and merchant mix. Overall, 9M22 core earnings were in line with our expectation, accounting 79.8% of full year forecast, though it trailed consensus’ estimate at 65.8%.

• Dividend. A single-tier interim DPS of 2.5 sen was declared, which came as a surprise to us since the last dividend was declared back in  4Q16 (0.5 sen).

• Outlook. While a deterioration in gross profit margin remains our concern, we believe that the surge in cashless payment adoption worldwide, especially for SMEs as well as higher cashless transaction volumes by end users would provide an upside catalyst for GHL’s earnings.

• Our Call. Reiterate our BUY call at a TP of RM1.15 pegged at 46x PER to 2023F EPS of 2.5 sen.

Source: BIMB Securities Research - 30 Nov 2022