GHLSYS (0021) - GHL Systems Bhd - Expanding Malaysian footprint
Target RM1.10 (Stock Rating: ADD)
We are positively surprised to learn that GHL has signed a long-term agreement with Amanah Ikhtiar Malaysia (AIM) to provide cashless payment solutions for AIM’s borrowers. This is GHL’s first project in the government sector. We see this announcement as another re-rating catalyst for the stock and raise our FY15-16 EPS forecasts by 5-10% to account for the additional earnings from the new venture. We maintain Add with a higher target price of RM1.10, based on 23.8x CY16 P/E (a 40% premium to the payment sector average), in view of its strong FY13-16 EPS CAGR of 76% and an attractive PEG of 0.7x. Stronger TPA earnings and M&A activities in new markets are potential catalysts. GHL is our top pick in the domestic technology sector.
What Happened
GHL announced that it has entered into a long-term agreement with AIM Solutions Sdn Bhd, a subsidiary of 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. AIM is a microfinance services provider to small entrepreneurs with an estimated RM1.6bn in disbursed loan as at Oct 14 and 350k borrowers nationwide. GHL is expected to deploy 8,000 e-payment terminals for AIM’s collection agents beginning first quarter of this year.
What We Think
We are positively surprised by GHL’s announcement and expect this deal to positively contribute to earnings from FY15. This partnership will helps GHL to increase its footprint in Malaysia by an additional 8,000 terminals. Management expects to spend about RM5m in capex for the new e-payment terminal, and is confident of achieving more than one million transactions per month. We estimate GHL to generate additional RM0.8-2.7m earnings in FY15 and FY16 mainly derived from transaction fee for the loan repayment by the borrowers. Apart from that, the new terminals will also enable GHL to offer additional services from existing e-pay products such as mobile prepaid top ups and utility bill services for AIM members. We think this service will be widely accepted by AIM collection agents and borrowers given that it eliminates the risk of handling cash. Malaysia has 45 million debit cards in circulation, according to the data from Bank Negara Malaysia.
What You Should Do
Accumulate the stock. Overall, we think GHL’s growth prospect is intact and we remain confident of its execution strategy.
Source: CIMB Daybreak - 12 February 2015
Target RM1.10 (Stock Rating: ADD)
We are positively surprised to learn that GHL has signed a long-term agreement with Amanah Ikhtiar Malaysia (AIM) to provide cashless payment solutions for AIM’s borrowers. This is GHL’s first project in the government sector. We see this announcement as another re-rating catalyst for the stock and raise our FY15-16 EPS forecasts by 5-10% to account for the additional earnings from the new venture. We maintain Add with a higher target price of RM1.10, based on 23.8x CY16 P/E (a 40% premium to the payment sector average), in view of its strong FY13-16 EPS CAGR of 76% and an attractive PEG of 0.7x. Stronger TPA earnings and M&A activities in new markets are potential catalysts. GHL is our top pick in the domestic technology sector.
What Happened
GHL announced that it has entered into a long-term agreement with AIM Solutions Sdn Bhd, a subsidiary of 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. AIM is a microfinance services provider to small entrepreneurs with an estimated RM1.6bn in disbursed loan as at Oct 14 and 350k borrowers nationwide. GHL is expected to deploy 8,000 e-payment terminals for AIM’s collection agents beginning first quarter of this year.
What We Think
We are positively surprised by GHL’s announcement and expect this deal to positively contribute to earnings from FY15. This partnership will helps GHL to increase its footprint in Malaysia by an additional 8,000 terminals. Management expects to spend about RM5m in capex for the new e-payment terminal, and is confident of achieving more than one million transactions per month. We estimate GHL to generate additional RM0.8-2.7m earnings in FY15 and FY16 mainly derived from transaction fee for the loan repayment by the borrowers. Apart from that, the new terminals will also enable GHL to offer additional services from existing e-pay products such as mobile prepaid top ups and utility bill services for AIM members. We think this service will be widely accepted by AIM collection agents and borrowers given that it eliminates the risk of handling cash. Malaysia has 45 million debit cards in circulation, according to the data from Bank Negara Malaysia.
What You Should Do
Accumulate the stock. Overall, we think GHL’s growth prospect is intact and we remain confident of its execution strategy.
Source: CIMB Daybreak - 12 February 2015
