GHLSYS remains cautious over the immediate term on less favourable merchant mix from the transaction payment acquisition (TPA) segment as well as lower profitability from the shared services segment due to ASP pressures. Meanwhile, it is working on new product offerings with higher margins (e.g. direct acquisition, buy now pay later or BNPL and micro lending) to be gradually rolled out in 2023. We maintain our forecasts, TP of RM1.10 and MARKET PERFORM call.

The key takeaways from our recent meeting with the group are as follows:

1. While GHLSYS remains optimistic on the outlook for the digital payment industry over the long term, the group reiterated its conservative guidance for gross profit margins in the immediate term due to unfavourable revenue mix as cross border payments have yet to pick up despite the reopening of international travel. In addition, the uptick in enquiries for more EDC terminal purchases could be dampened by a lower ASP on cost down request from banks, indicating that revenue and profitability from shared services (c.31% of group revenue) could remain lacklustre.

2. To address the issues impacting its margins, the group has been working on a pipeline of new offerings to be introduced gradually. Upon finalising the integration of Mastercard’s payment gateway with GHL’s proprietary payment interface, the group will be able to better expand its presence in the e-commerce space beyond Malaysia. By 2023, GHLSYS can begin to directly acquire merchants (in Philippines and Thailand) instead of partnering with banks to enable quicker onboarding processes and enjoy higher margins per transaction.

3. With all the necessary licenses acquired, GHLSYS aims to start offering its micro lending services in Indonesia and Philippines by early-2023. Besides that, the group will continue to partner with strategic BNPL players to enlarge its total addressable market. The recent partnership with Singapore-based start-up Ablr allows the group to: (i) process Ablr payments, and (ii) offer an in-house BNPL option by tapping onto Ablr’s backbone.

Forecasts. Maintained.

We maintain our MARKET PERFORM call and TP of RM1.10 on FY23F PER of 40x (in line with peers’ forward mean such as Revenue Group, PayPal and Square). There is no adjustment to our TP based on ESG given a 3-star rating as appraised by us (see Page 4).

Risks to our call include: (i) slower total processed value (TPV) growth, (ii) the reluctance of merchants to adopt cashless transactions, (iii) competition from existing and new local and international players.

Source: Kenanga Research - 29 Aug 2022