4QFY21 CNP of RM8.7m (+57% QoQ; +45% YoY) brings FY21 CNP to RM28.2m (-11% YoY), which came in within expectations, representing 102% and 97% of our and consensus full-year estimates, respectively. QoQ, 4QFY21 revenue grew 11% on higher activity in retail stores and holiday destinations amid the festive season, thanks to the easing of lockdown measures. With Malaysia looking to reopen its borders in 2QCY22 without quarantine imposed, we look forward to a better year for GHL in light of the return of tourist spending. Maintain OUTPERFORM with a lower Target Price of RM1.90.

Within expectation. GHL Systems (GHL)’s 4QFY21 CNP of RM8.7m (+57% QoQ; +45% YoY) brings FY21 CNP to RM28.2m (-11% YoY), which came in within expectations, representing 102% and 97% of our and consensus full-year estimates, respectively.

Results’ highlight. QoQ, 4QFY21 CNP rose 57% to RM8.7m on an 11% increase in revenue to RM95.3m. The improvement can be attributable to the higher vaccination rates across the country and the easing of lockdown measures which gave breath to retail outlets, restaurants and tourism, leading to increased spending (both online and offline) during the festive season. YoY, 4QFY21 CNP rose 45% while revenue edged 9% higher as a result of higher transaction value processed in both the TPA segment (+12%) and the e-pay segment (+17%). On a cumulative basis, FY21 revenue grew 8% to RM360.2m while CNP was 11% lower at RM28.2m owing to different revenue mix. While the TPA segment grew 15%, it was impacted by lower contribution from the shared services (-3.7%) as a result of terminal retrievals during the year. Solution services which provide customised projects saw a 2.7% drag but still commendable in our view despite the on-off lockdowns throughout 2021.

Returning to normalcy. Malaysia’s vaccination rate continues to improve with 79% of the population having received two doses while 45% has been administered booster shots which have been helpful in facilitating the rejuvenation of economic activity. We have observed that shopping malls continued to see strong levels of footfall and travel destinations experiencing high bookings in 2022. Furthermore, Health Minister Khairy Jamaluddin has indicated that Malaysia may fully reopen its borders in the second quarter without the need of mandatory quarantine.

Maintain FY22E CNP of RM47.1m and introduce FY23E CNP of RM52.9m, representing 67.5% and 12.3% growth, respectively.

Maintain OUTPERFORM rating with a lower Target Price of RM1.90 (previously RM2.30), based on a lower FY22E PER of 45x (previously 55x), representing +0.5 SD from 5-year mean to reflect the weaker investment appetite for technology counters.

Risks to our call include: (i) slower TPV growth, (ii) reluctance of merchants to adopt cashless transactions, (iii) competition from non-listed peers and overseas peers.

Source: Kenanga Research - 23 Feb 2022