CGS-CIMB Research sees strong growth for GHL Systems


  • Analyst Reports
  • Wednesday, 06 Nov 2019

E-Wallets gaining popularity. In its recent Budget 2020 announcement, the government said it plans to offer a one-time RM30 digital stimulus to qualified recipients to encourage e-wallet adoption.

KUALA LUMPUR: GHL Systems is a key beneficiary of the growing regional acceptance of mobile wallets, CGS-CIMB Equities Research said as e-wallets made up 11% of its total processing value (TPV) in 1H19 versus 6% in 1H18.

The research house project a 20% TPV CAGR between 2018 and 2021F driven by a growing merchant base and new product mix, such as mobile wallet.

“Maintain Hold with an unchanged RM1.45 TP, still based on 24 times CY21F P/E, ” it said.

CGS-CIMB Research said GHL Systems’s unit GHL Systems Philippines recently started to accept GrabPay wallet at its Philippines’ merchants. The group targets to enable 500 merchants to accept GrabPay by the end of 2019.

GHL has 86,000 merchant touchpoints across the Philippines as at end June 2019 that include high volume businesses such as convenience stores, petrol stations, grocery chains and food and beverage outlets.

GHL had also recently enabled the acceptance of 1) a ringgit-based WeChat Pay’s e-wallet at selected merchants in Malaysia to target local users, and 2) renminbi WeChat Pay for internet transactions in Cambodia.

“We see the inclusion of GrabPay and WeChat Pay wallets across Southeast Asia as an important driver of GHL’s total processing value (TPV) growth.

“To recap, GHL’s TPV surged 32% on-year to RM6.2bil in 1H19, driven by a 45% on-year increase in electronic transaction payment acquisition (TPA) transaction value on the back of a bigger merchant base. The group expects to deliver at least 30% TPV growth in FY19F.

“We estimate that e-wallets TPV accounted for approx. 11% of the group’s TPV in 1H19 compared to 6% in 1H18. In spite of the stronger contribution, the group highlighted that e-wallet providers offer merchant discount rates (MDR) of 25bp to 60bp, lower than its TPA MDR of 90bp, ” it said.

CGS-CIMB Research sees GHL as a potential beneficiary of the government’s Digital Malaysia initiative.

In its recent Budget 2020 announcement, the government said it plans to offer a one-time RM30 digital stimulus to qualified recipients to encourage e-wallet adoption.

The government is allocating RM450mil for this initiative. GHL could earn a processing fee for each mobile wallet transaction that is processed through its merchants.

“We keep our earnings forecasts. Maintain Hold with an unchanged RM1.45 TP, based on 24 times CY21F P/E, in line with the sector mean. Higher TPA margins and stronger contribution from overseas operations are key upside risks to our call.

“Declining MDR, TPV and delays in growing the merchant base are key downside risks to our call, ” it said.


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