IT Services | Author(s): Mohd Shanaz NOOR AZAM +60 (3) 2261 9078,
GHL’s FY14 core net profit was in line with our expectation at 104% of our estimate but only 86% of consensus’. Despite a higher effective tax rate in FY14, core net profit rose to RM9.7m vs. RM5.3m FY13, driven by stronger sales from its cash TPA segment following the e-Pay acquisition. We raise our FY15-16 EPS forecasts by 1-4% to account for higher TPA contribution driven by new merchant acquisition activities. We maintain our Add call, with a slightly higher RM1.11 target price, based on 23.8x CY16 P/E (40% premium over the payment sector average in view of GHL’s strong FY13-16 EPS CAGR of 78%). Stronger TPA earnings and M&A activities in new markets are potential re-rating catalysts. GHL is our top pick in the domestic tech sector.
4Q14 highlights
Revenue in 4Q14 rose to RM49.6m vs. RM16.2m a year ago, mainly due to higher contributions from the transaction payment acquisition (TPA) segment, which grew from RM4.1m to RM36.7m following the acquisition of e-Pay. GHL incurred a higher tax expense of RM3.1m during the quarter, partly due to additional RM1.2m in deferred tax expenses. Nonetheless, the company still recorded a higher core net profit of RM2.7m (vs. RM0.3 core net loss in 4Q13), after adjusting for impairment on trade receivables, inventories and intangible assets amounting to RM2.3m.
TPA-driven growth still on track
GHL is in the process of integrating its back-end system to the various banks in order to implement its TPA agreements to accept international credit cards. Management highlighted that the bulk of its effort in 2015 will be directed towards TPA initiatives in Malaysia and the Philippines. To recap, GHL is targeting to sign up 3,000-4,000 merchants in Malaysia following its agreement with Global Payments this year. Meanwhile, it also targets to sign up 300-500 merchants per month in the Philippines to accept payments using UnionPay and JCB International cards. Management expects its first TPA merchants to be on board in 2Q15 and expects more merchants recruited in 2H15, which is in line with our expectations.
Maintain Add
Accumulate GHL. Overall, we think that GHL’s growth prospects are intact and we are still confident of its execution strategy.
Willing buyer willing seller...... Buy at market price lor..... If you have no faith in this counter 50c also consider expensive... If you have faith in this counter future growth, current market price is a steal....
ff We left our recent meeting with GHL feeling confident about the group’s prospects, which will be driven by credit card Transaction Payment Acquisition (TPA) contribution in FY15 and better traction in ePay services. Management highlighted that FY15 will be a key year for GHL given that it will start credit card TPA in Malaysia and non-bank TPA in the Philippines. We maintain our FY15-17 EPS forecasts and Add call, with an unchanged target price of RM1.11, based on 23.8x CY16 P/E (40% premium over the payment sector average in view of GHL’s strong FY13-16 EPS CAGR of 78%). Stronger TPA earnings and M&A activities in new markets are potential re-rating catalysts. GHL is our top pick in the domestic tech sector.
What Happened We hosted 10 buyside analysts and fund managers last week for a meeting with GHL. The company was represented by group CEO Mr Kanagaraj Lorenz. Management discussed GHL’s earnings drivers following its 4Q14 results and outlook for FY15. In addition, management shared about GHL’s risk underwriting capability that allows it to embark on the credit card TPA business. It also plans to grow TPA activities with three potential banking partners in Malaysia and the Philippines this year. Management expects to secure a partnership with major Malaysian bank in 1H15. GHL is positive about the Bank Negara Malaysia (BNM) ruling to impose caps on interchange fees as this is expected to encourage more merchants to embrace e-payments given that it will effectively lower merchant discount rates (MDR) immediately.
What We Think While there were no surprises from the meeting, we were encouraged to learn that TPA-driven activities in Malaysia and the Philippines are still on track to start in 2Q15 following the completion of back-end network integration with its partners. We expect GHL to acquire a monthly average of 500 merchants in Malaysia this year, in line with its monthly target of 300-500 merchants. Apart from that, we see the reduction in interchange fees as positive for GHL because it provides more opportunities given that it is not economical for the banks to fulfil the 800k point-of-sales (POS) terminals target set by BNM. Moreover, merchant acquirers like GHL can still earn lucrative income as they do not necessarily need to reduce spreads from the MDR.
What You Should Do Accumulate GHL. Overall, we think that GHL’s growth prospects are intact and we are still confident about its execution strategy.
Key takeaways from GHL meeting We hosted approximately 10 buyside analysts and fund managers recently at a meeting with GHL Systems’s management. The company was represented by group CEO Mr Kanagaraj Lorenz @ Raj and the head of group investor relations, Dennis Saw. Raj remains upbeat about GHL’s growth prospects on the back of its TPA-driven activities in Malaysia and the Philippines following the full integration of ePay last year. Management highlighted that FY15 will be an important year for GHL as the company would commence its maiden credit card TPA in Malaysia following recent partnerships with Global Payments Card Processing (Malaysia) and non-bank TPAs in the Philippines. In addition, management expects to secure another TPA partnership with a local bank this year in order to boost its TPA activities in Malaysia. Meanwhile, management also reiterated its commitment to stay transparent about its TPA progress by disclosing information on the number of merchants acquired beginning in 2Q15. Apart from that, this year will mark GHL’s foray into the government sector following its agreement with Amanah Ikhtiar Malaysia (AIM) to provide cashless payment solutions for AIM’s borrowers. This partnership will enable AIM borrowers to use its ATM or a debit card instead of cash for loan repayments. Additionally, the new terminals will enable GHL to offer additional services from existing ePay products, such as mobile prepaid top-ups and utility bill services, to AIM members. GHL is expected to deploy 8,000 POS terminals for AIM’s collection agents starting from end-1Q15. Overall, we see decent growth potential in the government sector following recent quotes by government officials on the potential transition from cash payments to online payments for services such as passport renewals, visas and expatriate, PR border and student passes.
crawler, from your statement, you don't seem to have much knowledge in GHLSYS. Submission of GST by companies to Customs can be made via online banking. You don't need a company like GHLSYS for such service.
crawler, i advise u not to argue with me. I know the entire process of payment to customs from excise duties to sales tax, so I am very well-aware what I'm talking about. Payment of sales tax is as easy as paying your credit card bills online. GHLSYS comes in a different way and provide difference services to users.
ckwong, most of my positions are in GHLSYS, SMRT is just another stock that i buy. You being a short-termist investor has no clue what is happening. If you want me to predict share prices for the next 1 - 2 days, I must say no one can do that.
Rather than being so shallow in putting blames, why not reassess where you go wrong? Firstly, I'm sure you bought the SMRT at all time high. That is not recommendable and subsequent pullbacks gave you no safety margin. And to top it off, I am a long-term investor, hence your short-sightedness in investing looks childish to me.
Looking deep into SMRT, it is a great stock with good potential. SMRT is just like the previous GHLSYS, whereby it impairs when necessary and start anew. Infact, SMRT did not impair as much as GHLSYS. You can ask Christine, back then there were so many shallow investors talking bad of GHLSYS and now look who is the winner.
ckwong, you need to have a longer foresight and not just expect to be rich overnight trading in and out. If that is your case, being a non-professional like you, you will just end up burning more cash to long-term investors like us, by selling us cheaply in times of panic and just stare quietly when the price rebounds.
At last it broke 92 cent but whether can sustain or not !!! This fews day volume very high and be cautious. Beware of profit taking before GHL shoot up again and surplus rm 1.00 in near term. Good luck for those invest in this counter. Huat Ah ! Heng Ah ! Ong Ah.
Stock: [GHLSYS]: GHL SYSTEMS BHD Feb 12, 2015 11:37 AM | Report Abuse
Definitely stronger earnings traction here on. Momentum should build up fairly quickly to the 90 cents level first stop.
_________________
Ok guys I am taking my profit here on this momentum at 97-98 cents. Entry price on February 12 was 81 cent. Profit 20% 1 month holding. Thank you and good luck to all.
I bought at 84,85,86 cents . Sold all 133 lot just now at 97 cents. this was the fifth day GHL. up up and away. Take a rest before climb higher. Goon luck everybody.
Tak ape saya naik King Kong ini sampai RM 1.00 wakakaka. Sifu say madiba keluar dulu hehe.
_________________________
Stock: [MPAY]: MANAGEPAY SYSTEMS BERHAD Feb 16, 2015 10:20 AM | Report Abuse
okok brother ImCK saya cool u dapat untung saya happi untung u. Saya cuma nak tanya chickenstock mana dia tahu itu earnings yang you cakap akan keluar memang ok tapi sudah peak dia kata? Kalau sudah peak makna nya QR lepas itu koyak brother. Jadi saya kan trader, bila orang beli saya jual lor tapi madiba dah kata dia akan jual di paras 22 sen jadi saya tak mahu beli kaunter ini sebab upside limited. Yang saya sudah beli ialah GHL di paras 82 sen minggu lalu yay!
Stock: [GHLSYS]: GHL SYSTEMS BHD Feb 12, 2015 05:23 PM | Report Abuse
Ok sudah masuk round ketiga 81-82 sen. Wakakaka untung akan mali cepat cepat!
___________________-
GHL adalah King Kong, Mpay adalah monyet kecil, pasti lar saya naik King Kong wakakaka.
New IPO: Building management systems (BMS), solar thermal systems and energy-saving services provider, Solar District Cooling Bhd aims to list on the Ace Market!
MQ Trader 366 views | 2 d ago
0:17
New IPO: The onshore and offshore support services provider for the O&G industry, Steel Hawk Bhd aims to list on the Ace Market!
MQ Trader 11699 views | 10 d ago
0:17
New IPO: The largest mini-market player and a leading groceries retailer in Malaysia, 99 Speed Mart Retail Holdings Bhd aims to list on the Main Market!
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
Tornado
1,938 posts
Posted by Tornado > 2015-02-27 22:56 | Report Abuse
@wiseeye, mind take a look at smrt just release financial report and provide your view ?