GHLS MK / GHLS.KL  | ADD - Maintained  | RM0.85 tp:RM1.11▲ 

Mkt.Cap:US$151.00m  | Avg.Daily Vol:US$0.80m  | Free Float:35.30% 

IT Services  | Author(s): Mohd Shanaz NOOR AZAM +60 (3) 2261 9078,

GHL’s FY14 core net profit was in line with our expectation at 104% of our estimate but only 86% of consensus’. Despite a higher effective tax rate in FY14, core net profit rose to RM9.7m vs. RM5.3m FY13, driven by stronger sales from its cash TPA segment following the e-Pay acquisition. We raise our FY15-16 EPS forecasts by 1-4% to account for higher TPA contribution driven by new merchant acquisition activities. We maintain our Add call, with a slightly higher RM1.11 target price, based on 23.8x CY16 P/E (40% premium over the payment sector average in view of GHL’s strong FY13-16 EPS CAGR of 78%). Stronger TPA earnings and M&A activities in new markets are potential re-rating catalysts. GHL is our top pick in the domestic tech sector.

4Q14 highlights 

Revenue in 4Q14 rose to RM49.6m vs. RM16.2m a year ago, mainly due to higher contributions from the transaction payment acquisition (TPA) segment, which grew from RM4.1m to RM36.7m following the acquisition of e-Pay. GHL incurred a higher tax expense of RM3.1m during the quarter, partly due to additional RM1.2m in deferred tax expenses. Nonetheless, the company still recorded a higher core net profit of RM2.7m (vs. RM0.3 core net loss in 4Q13), after adjusting for impairment on trade receivables, inventories and intangible assets amounting to RM2.3m. 

TPA-driven growth still on track

GHL is in the process of integrating its back-end system to the various banks in order to implement its TPA agreements to accept international credit cards. Management highlighted that the bulk of its effort in 2015 will be directed towards TPA initiatives in Malaysia and the Philippines. To recap, GHL is targeting to sign up 3,000-4,000 merchants in Malaysia following its agreement with Global Payments this year. Meanwhile, it also targets to sign up 300-500 merchants per month in the Philippines to accept payments using UnionPay and JCB International cards. Management expects its first TPA merchants to be on board in 2Q15 and expects more merchants recruited in 2H15, which is in line with our expectations. 

Maintain Add 

Accumulate GHL. Overall, we think that GHL’s growth prospects are intact and we are still confident of its execution strategy. 
     
Previous [ GHL Systems Bhd ] reports... 
15/2/15  Co.Flash  Payment reforms beneficiary  (ADD, RM0.85 tp:RM1.10)
12/2/15  Co.Flash  Expanding Malaysian footprint  (ADD, RM0.82 tp:RM1.10▲)
28/1/15  Co.Flash  Securing Malaysian TPA  (ADD, RM0.77 tp:RM1.00)

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