GHLSYS is upbeat on 3QFY23 given the strong transaction payment value (TPV) momentum seen in Jul. The return of travelling and wider usage of Alipay has boosted cross-border e-wallet transactions (20% of e-wallet total payments). Meanwhile, its higher-margin products are on track to hit the market with the direct merchant acquisition rollout in the Philippines in Sep 2023 and Thailand in Dec 2023. We maintain our forecasts, TP of RM0.98 and OUTPERFORM call.

We came away from GHLSYS’s post-1QFY23 briefing encouraged by its positive outlook. The key takeaways from the meeting are as follows:

1. GHLSYS sees encouraging signs moving into 3QFY23, driven by strong TPV recorded in July, marking its highest monthly TPV which should pave the way for a satisfactory QoQ performance. The group also clarified that the higher tax rate in 2QFY23 was mainly attributable to the recognition of one-off additional tax from its Philippines operation due to under-provision discovered in its 2021 taxation worth c.RM1m.

2. There was improvement seen from its cross-border e-wallet transactions on the back of the return of travelling and the wider usage of Alipay. As such, cross-border transactions now make up 20% of ewallet payments (from 13% in 1QFY23 and 2% a year ago). The group expects the trend to continue into 3QFY23 with the gradual return of international tourists, especially from China.

3. In terms of introducing higher-margin products, the group has successfully obtained all the requisite approvals for the rollout of its direct merchant acquisition (via Mastercard gateway) in the Philippines, scheduled for September 2023, with a subsequent launch in Thailand expected in December 2023. Furthermore, the micro-lending initiative continues to exhibit robust growth, with RM32m deployed YTD, a notable increase from RM24m in 2QFY23. The group is optimistic that the timely introduction of this new product in Thailand will yield positive results, especially as the Thai government explores the possibility of removing visa requirements to attract Chinese and Indian tourists.

Forecasts. Maintained.

We also maintain our TP of RM0.98 based on an unchanged 32x FY24F 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 TPV growth, (ii) reluctance of merchants in adopting cashless transactions, (iii) competition from nonlisted peers and overseas peers.

Source: Kenanga Research - 5 Sept 2023