Kenanga Research & Investment

GHL Systems - Cross-Border Transactions Rise

Publish date: Fri, 02 Jun 2023, 10:01 AM

GHLSYS remains upbeat on its outlook for the year, underpinned by the rebound in offline retail transactions as well as the resurgence of cross-border e-wallet transactions via Alipay. The group aims to fuel growth by introducing lucrative product offerings such as the direct acquisition of merchants and extending its micro-lending services in Thailand and Philippines. We maintain our forecasts, TP of RM1.05 and OUTPERFORM call.

We came away from GHLSYS’s post-1QFY23 briefing reassured of its growth prospects. The key takeaways from the meeting are as follows:

1. GHLSYS maintains a positive outlook on its growth trajectory for the upcoming quarters, driven by strong transaction payment value (TPV). In 1QFY23, the group achieved a new TPV milestone, with a notable increase of 14% YoY and 3% QoQ. This growth was fuelled by robust transaction volumes in Malaysia, Thailand, and Philippines, as offline retail transactions continued to gain traction.

2. Interestingly, there has been a significant recovery in cross-border ewallet transactions, albeit from a low base, attributable to the resumption of international travel and the increased usage of Alipay. This positive trend has significantly boosted cross-border transaction volumes, which now represents 13% of e-wallet transaction payments, a substantial increase from the 2% recorded just a year ago. This resurgence highlights the growing popularity in cashless cross-border transactions, signalling promising opportunities for continued growth.

3. In line with its growth trajectory, GHLSYS is committed to introducing higher-margin product offerings that will fuel its expansion. The group has successfully obtained the required approvals to initiate direct acquisition of merchants in Thailand and Philippines, with the roll-out scheduled for August and 4QFY23, respectively. Furthermore, the micro-lending initiative has gained good traction, with RM24m deployed YTD, an increase from RM7.8m in February 2023. With an average lending size of c.RM50,000 per merchant, GHLSYS is poised to extend this valuable service to neighbouring countries such as Thailand and Philippines within the current year.

Forecasts. Maintained.

We also maintain our TP of RM1.05 based on 35x FY23F PER, in line with peer’s forward average such as Shift4 Payments, 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).

Investment thesis. We like GHL for: (i) being the largest player in Malaysia’s terminal payment business, (ii) its venture into the buy now pay later (BNPL) scheme, and (iii) having a growing presence in neighbouring countries. Maintain OUTPERFORM.

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

Source: Kenanga Research - 2 Jun 2023


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