INVESTMENT MERIT

- Strong share price run-up in two months. Since our Trading Buy call on 24th June 2013 at RM0.30, GHLS’ share price has surged by 61.7% to RM0.485. This clearly outperformed the benchmark FBM Small Cap Index, which only advanced by 10% to 15,311.9, over the same period.

- 2Q13 results should be within expectations. The group is scheduled to release its 2Q13 results tomorrow. We are of the view that its 1H13 results should come in within our full year expectations of c.RM8m for FY13 underpinned by projected robust growth in its shared services and  solution services coupled with improvement in its EBITDA margin.

- Take profit as current valuation appears overstretched.  GHLS is currently trading at a forward PER of 11.7x which is at a 23% premium to the FBM Small Cap forward PER of 9.1x. While the group’s long-term prospects look promising, its current valuation appears to be overstretched thus capping its potential upside. As a result, we advocate investors to take profit for now and re-accumualte on price weakness.

- Excellent long-term prospects.  We believe the group’s earnings long-term prospects is bright underpinned  by the current low usage of credit card/debit card and loyalty programmes in Malaysia, Thailand and Philippines where GHLS has presence. This is evidenced by the lagging ratios of credit-card transactions-to-population ratio in  Thailand, Philippines and Malaysia, which stand at only 5.8x, 1.1x and 11.2x respectively compared to Singapore’s 46.3x. In the local market, the government’s drive towards becoming a cheque-less economy and reducing dependency on cash transactions (one of the 10 EPPs identified under the government’s ETP which emphasises on creating an integrated payment system) could benefit GHL, being the leading e-payment solution provider in Malaysia. 

SWOT ANALYSIS

- Strength: Multiple revenue options within one value flow.

- Weaknesses:  Low switching costs for merchants and banks.

- Opportunities:  Growing acceptance of electronic payments.

- Threats: Changes in economic and social conditions

TECHNICALS

- Resistance: RM0.52 (R1), RM0.55 (R2)

- Support: RM0.46 (S1), RM0.41 (S2) 

- Comments: GHLS has enjoyed a strong rally since mid of last month. While the MACD indicators have yet to show major signs of strain, the RSI has just dipped down from overbought levels. As such, further consolidation is expected towards the RM0.46 support level. Should this support level be violated, GHL could then retreat further towards RM0.41.

Source: Kenanga