GHLSYS (0021) : GHL Systems Bhd - TPA-driven growth still on track
Target RM1.06 (Stock Rating: ADD)
GHL’s 9M14 core net profit came in below expectations at 62% of CIMB’s full-year estimates and 47% of consensus. Despite a significantly higher effective tax rate in 3Q14, core net profit grew by 20% yoy driven by higher sales from its cash TPA segment following the e-pay acquisition in 1Q14. We cut our FY14 EPS forecast by 12% as we raise our effective tax assumption, but largely maintain our FY15-16 estimates. We maintain our Add rating on the stock with a RM1.06 target price, still based on 23.8x CY16 P/E, (40% premium over the global payment average of 17x, in view of its stronger EPS CAGR of 75% for FY13-15 and attractive PEG of 0.6x). Stronger earnings from credit card TPA and potential M&A activities are re-rating catalysts.
3Q14 highlights
Revenue in 3Q14 was up to RM45.3m compared RM17.3m a year ago, mainly due to higher contributions from the transaction payment acquisition (TPA) segment, which grew from RM3.9m to RM34.6m following the acquisition of e-Pay services in 1Q14. However, the stronger sales was somewhat offset by lower contributions from shared and solution services due to lower terminal and card sales. GHL posted a higher core net profit of RM2.4m vs RM2m in 3Q13, after accounting for a RM0.6m one-off inventory adjustment.
Stronger earnings visibility with e-Pay
Following the integration of e-Pay, GHL’s annuity-based revenue increased from 72.9% to 92.8%, which helped the company reduce its earnings volatility. The higher annuity-based revenue is also reflected in its TPA segment which now contributes 77% to the overall group revenue. We expect GHL’s annuitybased revenue to increase further when its credit card TPA business in Malaysia, Philippines and Thailand become operational.
Credit card TPA is still on track
Management still expects to receive approval from the acquiring bank partner in Malaysia within this quarter before launching its credit card TPA service in Malaysia in 2015. Apart from that, GHL is also waiting for the regulatory approval to launch its credit card TPA service in the Philippines. Meanwhile in Thailand, the company is scaling back its marketing and sales initiatives given the uncertainty surrounding the country’s political environment. Overall, we think its growth strategy is intact and are confident of its execution strategy.
Source: CIMB Daybreak - 27 November 2014
Target RM1.06 (Stock Rating: ADD)
GHL’s 9M14 core net profit came in below expectations at 62% of CIMB’s full-year estimates and 47% of consensus. Despite a significantly higher effective tax rate in 3Q14, core net profit grew by 20% yoy driven by higher sales from its cash TPA segment following the e-pay acquisition in 1Q14. We cut our FY14 EPS forecast by 12% as we raise our effective tax assumption, but largely maintain our FY15-16 estimates. We maintain our Add rating on the stock with a RM1.06 target price, still based on 23.8x CY16 P/E, (40% premium over the global payment average of 17x, in view of its stronger EPS CAGR of 75% for FY13-15 and attractive PEG of 0.6x). Stronger earnings from credit card TPA and potential M&A activities are re-rating catalysts.
3Q14 highlights
Revenue in 3Q14 was up to RM45.3m compared RM17.3m a year ago, mainly due to higher contributions from the transaction payment acquisition (TPA) segment, which grew from RM3.9m to RM34.6m following the acquisition of e-Pay services in 1Q14. However, the stronger sales was somewhat offset by lower contributions from shared and solution services due to lower terminal and card sales. GHL posted a higher core net profit of RM2.4m vs RM2m in 3Q13, after accounting for a RM0.6m one-off inventory adjustment.
Stronger earnings visibility with e-Pay
Following the integration of e-Pay, GHL’s annuity-based revenue increased from 72.9% to 92.8%, which helped the company reduce its earnings volatility. The higher annuity-based revenue is also reflected in its TPA segment which now contributes 77% to the overall group revenue. We expect GHL’s annuitybased revenue to increase further when its credit card TPA business in Malaysia, Philippines and Thailand become operational.
Credit card TPA is still on track
Management still expects to receive approval from the acquiring bank partner in Malaysia within this quarter before launching its credit card TPA service in Malaysia in 2015. Apart from that, GHL is also waiting for the regulatory approval to launch its credit card TPA service in the Philippines. Meanwhile in Thailand, the company is scaling back its marketing and sales initiatives given the uncertainty surrounding the country’s political environment. Overall, we think its growth strategy is intact and are confident of its execution strategy.
Source: CIMB Daybreak - 27 November 2014
