GHL Systems Bhd’s near-term prospects reassuring as it is guided for a strong 4QFY23 on RM1 billion e-wallet credits dished out via the eMadani initiative, Kenanga Research said after post-3QFY23 briefing with the group.
“The higher foreigners’ spending in Malaysia, thanks to a 30-day visa-free entry for Chinese and Indian visitors from Dec 1. It has started direct merchant acquisition in the Philippines and will do the same in Thailand by end 2023,” it said in its Company Update today (Dec 4).
It maintains its OUTPERFORM call, its forecasts, and TP of RM0.88 and based on an unchanged 32x FY24F PER, in line with peer’s forward average such as Shift4 Payments, PayPal and Square.
“There is no adjustment to our TP based on ESG given a 3-star rating as appraised by us.”
The research house noted GHL guided for higher transaction payment volume (TPV), notably in December.
“This optimism stems from the government’s recent e-Madani initiative, offering RM100 e-wallet credit to individuals earning below RM100,000 annually starting today.
“This initiative presents a potential addressable volume of RM1 billion, as the credits are nontransferable and designated for spending.
“Furthermore, the anticipation of heightened spending by travellers in December, following the government’s announcement of 30-days visa-free entry for visitors from China and India starting 1 Dec 2023, adds to the positive outlook,” it said.
Post-briefing, the research house noted GHL has initiated its direct merchant acquisition (DA) efforts in the Philippines, with plans to go live in Thailand by the end of 2023.
“This strategic move enables the group to access merchant segments overlooked by traditional banks and ensures faster onboarding by handling the entire process.
“The micro-lending initiative demonstrates strong growth, with RM45 million deployed as at 3QFY23. It will be extending its micro-lending services into Thailand and the Philippines gradually,” it said.
Kenanga noted that the group has disclosed ongoing expenses related to its data migration to the cloud through Amazon Web Services (AWS), intending to expedite completion from mid-2025 to end-2024.
“Despite resulting in temporary higher expenses, a total of RM5 million in FY24 and RM6m in FY25, the group deems this investment necessary for future scalability.
“This initiative supports the expansion of service offerings, including microlending and direct merchant acquisition (DA), into neighbouring
countries,” it added.
The research house added it favours GHL for being the largest player in Malaysia’s terminal payment business, its venture into the buy now pay later (BNPL) scheme, and having a growing presence in neighbouring countries.
The risks to Kenanga’s call include slower TPV growth, reluctance of merchants in adopting cashless transactions, competition from non-listed peers and overseas peers.
