• Overview. GHL System Berhad (GHL) reported a record-breaking revenue in 4Q22 at RM113mn (+19.0% YoY, 9.6% QoQ) which led to improvement in core profit by 12.4% YoY and 21.8% QoQ to  RM9.8mn. The strong growth in revenue during 4Q22 was primarily driven by higher EDC hardware sales and rental in shared services as well as an increase in transaction processing value from transaction payment acquisition (TPA) segment during the quarter.

• Key Highlight: In 4Q22, e-payment’s merchant discount rate (MDR)  surged to its peak since the lockdown measure in 1Q20 or at 67 bps,  up by 1 bps QoQ and 7 bps YoY.

• Against Estimates: Above. GHL’s 12M22 revenue was in line with our estimates while core profit exceeded our forecast at 122%. The deviation was due to higher contribution from the shared services amid better margin and improvement in gross profit (GP) margin within the card payment services.

• Earnings revision. No change in our earnings forecast pending further insight from the management during the analyst briefing on  February 27th.

• Outlook. We remain optimistic on GHL’s near-term outlook driven by higher cashless payment adoption regionally, the reopening of more retail outlets with the full economic reopening, and an increase in inbound travellers amid the relaxation in travel restrictions (i.e., arrival of Chinese tourists) which will boost GHL’s  TPA segment.

• 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 - 24 Feb 2023