GHLSYS remains sanguine on an elevated transaction payment volume (TPV) moving into 1QFY24 backed by the RM1b e-Madani cash handout. It indicated that its business upgrading expenses (c. RM12.8m) incurred was one-off in nature to support product offerings. We maintain our forecasts, TP of RM0.88 and OUTPERFORM call.

We came away from GHLSYS’s post-4QFY23 briefing feeling reassured of its near-term prospects. The key takeaways are as follows:

1. GHLSYS remains optimistic for its TPV to remain healthy in 2024. For 1QFY24, it will be buoyed by the RM1b e-Madani cash handout disbursed in Dec 2023 comprising RM100 e-wallet credit to individuals which will have to be spent (non-transferrable) by Feb 2024. In addition, the group also observes an uptick in better margin payment methods such as its credit card transaction volumes coupled with a gradual recovery from overseas e-wallet transactions by tourists.

2. We also learnt that GHLSYS had invested c.RM8m in FY23 for licenses and upgrade of IT infrastructure to initiate its direct merchant acquisition (DA) efforts in the Philippines and Thailand which went live towards the end of last year. In addition, there was a RM4.8m provision for expected credit loss (ECL) attributed to the recently launched micro-lending business. The group indicated that tighter control and monitoring efforts have been put in place to reduce non-performing loans and that a large portion of these expenses are one-off in nature which is crucial for its business expansion. As such, FY24 is poised to be a year of reaping the benefits from the groundwork laid in the prior year, as the company scales up these new offerings with improved margins.

3. Despite e-wallet players beginning to charge 1% fees for reloads via credit card, GHLSYS assured that this will not deter the widespread adoption of cashless payment. In fact, users whom opt to reload via DuitNow instead, which has zero fees, will still contribute positively to GHLSYS’s e-pay segment. This underscores the group's omnipresence throughout the cashless payment supply chain, enabling it to capture transactions across its diverse product portfolio.

Forecasts. Maintained.

Valuations. We also maintain our TP of RM0.88 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 case. 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 non- listed peers and overseas peers.

Source: Kenanga Research - 1 Mar 2024