GHL Systems gaining investors’ attention

By DASHVEENJIT KAUR

GHL Systems Bhd is attracting the attention of investors as the e-payment ecosystem expands.

Now, majority-owned by private-equity (PE) firm Actis Group, the payment service provider’s stock price has rallied on momentum from its spate of recent deals and partnerships.

The stock had risen 76% in value year-to-date, closing at RM1.57 yesterday as analysts await the next phase in the price trajectory.

The price breakout on Tuesday led chartist from Alliance Research Sdn Bhd to note if GHL’s price can break past the RM1.64 resistance level, it could go on to trade in the RM1.85 to RM2 range.

The stock will likely have strong buying support at the RM1.55 level, which the stock tested in yesterday’s trade.

Fundamental-based analysts like Mohd Shanaz Noor Azam of CIMB Investment Bank Research have moved to downgrade GHL Systems Bhd. Mohd Shanaz downgrade GHL to ‘Hold’ from ‘Add’ with a target price of RM1.60, slightly above the consensus average of RM1.55.

According to Hong Leong Investment Bank Bhd with the tapering off of buying euphoria in the second-quarter (2Q) of 2017, coupled with the expectation of a lacklustre economic outlook for the 3Q, investors should look at e-commerce-based stocks.

“We prefer stocks with defensive attributes, coupled with earnings visibility and stable dividend payment in order to sail through a potential volatile 3Q. For exposure under e-commerce, GHL will be a direct beneficiary,” it said.

GHL at its core is a payment services and solutions provider with operations in Malaysia, the Philip- pines, Thailand and Australia.

In April, GHL partnered with global online payment platform, Alipay, to offer Malaysian in-store and online merchants an alternative payment method.

The agreement is similar to the tie-up GHL has with Alipay in Thailand since mid-2016.

Alipay is China’s leading third- party online payment solution owned by the Alibaba Group.

CEO of GHL, Danny Leong, during the launch of the collaborative venture in April, said GHL has been working around the clock to add Ali- pay to the existing suite of payment services it offers to its merchants.

“We already have the infrastructure in place. The credit card terminals and barcode readers that we provide to merchants are also able to read QR codes for Alipay.

“It also accepts many forms of contactless payments like Samsung Pay. With over 450 million users, Alipay’s entry into Malaysia is nothing to sneeze at,” Leong had said.

GHL also added 100 merchants from over 500 in-store locations across Malaysia in April and the company hopes to grow the number to 1,000 sites by 3Q.

GHL shares hit limit-up in April following news of its partnership with Alipay.

Listed on Bursa Malaysia since 2003, GHL manages more than 150,000 points of sale within Asean countries that enable credit card, debit card, prepaid contactless payment, loyalty, prepaid top up and bill payment collection services.

The group’s primary business is providing a comprehensive electronic payment service (EPS) network through its point-of-sale (POS) terminals for merchants.

It also provides e-debit services under an arrangement with Malaysian Electronic Clearing Corp Sdn Bhd, which is the owner and operator of the service.

GHL has software development centres in Wuhan (China), the Philippines and Malaysia.

For its financial year ended Dec 31, 2016, GHL’s revenue rose 16.3% year-on-year (YoY) to RM245.9 million due to stronger contribution from solution services, shared services and transaction payment acquisition (TPA) services.

For the first three months of this year, GHL posted a 28.1% rise in quarter-to-quarter (and 57.1% YoY) profits to RM8.5 million.

The improved result was contributed by the strong performances of its shared services (+62% YoY) and TPA business (+12% YoY) on higher Electronic Data Capture rental sales and higher transaction fees earned respectively.

“We expect TPA business to remain the key growth driver going forward following several agreements such as with Global Payments, CIMB, Alipay and AFPI (Beepcard) in the Philippines,” BIMB Securities Sdn Bhd noted in a recent note on the company.

Under the digitisation of government services theme, BIMB Securities has GHL as its stock pick with a target price of RM1.90. GHL is the sole stock covered under the digitalisation of commerce theme.

“It (GHL) also provides regional exposure to the Thailand and the Philippines markets,” BIMB Securities added.

The research firm noted there are other players in the market such as Managepay Systems Bhd, but their infrastructure and presence are not as well established as GHL’s.

“Against its global peers, we believe GHL makes a compelling investment case as it makes a good regional proxy to the growing card-based and e-payment service in emerging markets such as Thailand and the Philippines,” BIMB Securities explained.

BIMB Securities placed a ‘Buy’ call on GHL based on key catalysts such as higher volume and transactions value for card payment services business.

The research firm said a dividend payout could slowly build its reputation as a compelling medium- to long- term investment.

To recap, London-based PE firm Actis Stark (Mauritius) Ltd emerged as GHL’s biggest shareholder after buying a 44.4% stake in the group from a unit of PE firm Creador, as well as GHL’s executive vice chairman Simon Loh at RM1 per share.

Actis extended an unconditional mandatory takeover offer for the group’s remaining shares at the same price.

AmInvestment Bank Bhd, acting as independent advisor, had urged the remaining GHL shareholders to reject Actis’ takeover offer, calling the offer “not fair and not reasonable”.