GHLSYS’s 1QFY24 met expectations. Its net profit fell 29% due to lumpy IT infrastructure costs for future expansion. This was despite an 18% growth in top line with better performance from both transaction payment acquisition (TPA) and shared services segments. We keep our forecasts and TP of RM1.08 (offer price) and maintain our ACCEPT OFFER recommendation.

Within expectations. GHLSYS’s 1QFY24 net profit of RM4.7m (-29% YoY) only accounted for 15% of both our full-year forecast and the full- year consensus estimate. However, we deem the results within expectations given that 1Q is seasonally weak.

YoY, its 1QFY24 revenue climbed 17.9% on higher contributions across all segments. Its TPA segment which accounted for 70% of the group’s revenue rose 17% as a result of higher transaction volume and value. The shared service segment rose 23% due to higher electronic draft capture (EDC) sales in Malaysia which offset the lower rental revenue. However, its net profit fell 29% due to higher operating expenditure to grow its merchant base, as well as IT infrastructure and staff costs.

QoQ, its 1QFY24 revenue dipped 4.4% while net profit fell at a larger quantum of 48% from a high base in 4Q (due to the year-end shopping season). Additionally, the group incurred direct acquiring business, IT security and cloud infrastructure costs.

Outlook. It is optimistic about sustained growth in the three main markets it operates in, i.e. Malaysia, Thailand and Philippines and its three main business pillars, i.e. TPA, shared services and solution services, underpinned by the continued adoption of cashless payment. In addition, the group will continue to scale up its high-margin micro lending business.

Forecasts. Maintained

Valuations. We keep our TP at the offer price of RM1.08 and maintain our ACCEPT OFFER recommendation.

Risks to our call include NTT Data’s failure to secure a 90% stake to make the privatisation mandatory.

Source: Kenanga Research - 29 May 2024