• An established e-payment specialist. GHLSYS’ (listed in 2003 on ACE market and subsequently promoted to Main Board in 2007) businesses can be organised into three core categories, comprising of Shared Services, Solution Services and Transaction Payment Acquisition.
• The activities within each core business are explained below: 1) Shared Services. Comprises mainly revenue derived from the sales, rental and maintenance of Electronic Data Capture (EDC) terminals and other card acceptance devices and the supply of cards to banks and other payment operators. 2) Solution Services. Comprises mainly revenue derived from the sales and services of payment solutions, which include network devices and related software, outsourced payment networks, management/processing of payment and loyalty cards, internet payment processing and the development of card management systems. 3) Transaction Payment Acquisition (TPA). Comprises revenue derived from directly contracting with merchants to accept payment and loyalty cards, and conduct other payment services.
• A strong proxy to buoyant e-payment growth in ASEAN. In Malaysia, GHLSYS is one of the major beneficiaries of the Government’s pus h to reduce cash transactions by increasing electronic payments . In essence, Bank Negara Malaysia (BNM) has instituted measures to stoke demand for cashless payments through an increase in point-of-sales (POS) terminal deployment. The central bank targets to reduce cash transactions to 63% by 2020 from over 90% currently. To achieve this, BNM looks set to triple the amount of POS terminals in the country to 800k by 2020 from over 230k currently, which could translate into greater business volume for GHLSYS which is involved in sales and rental of EDC terminals. Besides, GHLSYS is a proxy to the e-payment growth in ASEAN and is well-positioned to tap into the rising demand for non-cash payments in these markets, as rising household income feeds a burgeoning appetite for consumer goods and underlies the need for these economies to go cashless.
• While sales and rental of EDC terminals and their related software have been the bread-and-butter of GHLSYS business, the company is shifting its focus to a transaction-based revenue model via its TPA segment to better capture the market potential of the rising e-payments growth across ASEAN markets. To date, GHL has expanded its TPA footprint in Malaysia, the Philippines and Thailand through TPA partnerships with banking and non-banking institutions.
• Grossly oversold. GHLSYS share prices tumbled 25% from a 6-month high of RM1.19 (23 Jul) to a low of RM0.85 (12,13 & 17 Aug) before ending at RM0.895 on 23 Dec. At RM0.895, GHLSYS is trading at 2.45x P/B (FIG1), about 73% lower than domestic and international peers. We believe such valuations have provided a sufficient margin of safety to cushion further sharp share price decline, supported by grossly oversold daily and weekly slow stochastic indicators. Key supports are RM0.885 and RM0.85.
• As daily indicators are not showing signs of hook-up, GHLSYS share prices may continue to trade sideways in the near term. Nevertheless, after a brief sideways consolidation, we expect GHLSYS to trend higher again, from grossly oversold positions. A decisive breakout above RM0.905 (10-d SMA) will spur prices higher to retest RM0.94 (17 Dec high) and RM1.00 psychological barrier before reaching our LT objective at RM1.06 (200-d SMA) levels. Cut loss at RM0.84.
• Attractive risk to reward ratio with 18.4% upside against 6.1% downside. All in, we see a good risk to reward ratio for investor with a theoretical entry price of RM0.895 given that the downside to the cut loss zone of RM0.84 is 5.5 sen (-6.1%) while the upside to the LT target of RM1.06 is 16.5 sen (+18.4%).

Source: Hong Leong Investment Bank Research - 28 Dec 2015