GHL Systems (GHL) as a payment processor is poised for exciting growth due the urgent need for digital payment adoption among merchants which are still highly reliant on cash-based transactions. GHL has taken the initiative to act as a third-party acquirer catering to the underserved small to micro companies which in turn accelerates rollout and expands its addressable market beyond top-tier companies. BUY with a TP of RM2.30 based on FY22E PER of 55x, given its solid track record and being the only player with a strong ASEAN presence to ride the digital payment boom.

The importance of digital payment has never been more emphasised in the past 18 months amid the emergence of Covid-19. While consumers had time to familiarise with digital payment platforms, cash-based merchants saw sales plunging overnight as lockdown protocols kicked in. Therefore, many merchants are seeing an urgent need to digitalise their business and embrace digital payments as consumers are expected to continue using these platforms even as the pandemic eases.

In addition to having the bank as an acquirer to expand its presence and increase touchpoints across ASEAN, GHL has also taken on the role as a third-party acquirer to cater for the underserved small to micro companies that are often rejected due to overly stringent bank requirements. By focusing on this two-pronged approach, GHL is able to expand its addressable market hence expand its revenue base. More importantly, playing the role of a third-party acquirer will allow GHL to: (i) have quicker roll-out of its EDC terminal/gateway, and (ii) earn recurring income from the MDR fee received.

As part of the ASEAN Payment Connectivity initiative, Bank Negara Malaysia has started to implement cross-border digital payment with Thailand which allow (i) Malaysian e-wallet user to scan Thai QR code and vice versa (going live by 4Q 2021) and (ii) cross-border digital transaction by referencing recipient’s mobile number (going live by 4Q 2022). This initiative will lead to a surge in digital payment volume when borders reopen and GHL is well positioned to benefit with more than 383,600 touchpoints across ASEAN.

Source: Rakuten Research - 24 Jun 2021