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Thursday, December 18, 2014

GHL subsidiary signs TPA agreement in the Philippines (Edge)

Maintain “add” with a target price (TP) of RM1: GHL Systems announced that its subsidiary, GHL Philippines, had signed an agreement for a prepaid card transaction payment acquisition (TPA) arrangement in the Philippines. Omnipay Inc has appointed GHL to acquire merchants for UnionPay International and JCB International. This marks GHL’s entry into the direct merchant acquisition space, consolidating its position as the leading payment services provider in the Philippines.

We maintain our financial year 2014 (FY14) to FY17 earnings per share (EPS) forecasts and reiterate our “add” call and TP, still based on 23.8 times calendar year 2016 price-earnings ratio, 40% premium to the payment sector average, in view of its strong FY13 to FY16 EPS compound annual growth rate (CAGR) of 72% and attractive profit-earning growth ratio of 0.57 times.

Stronger TPA earnings and mergers and acquisitions activities in new markets are potential catalysts. GHL is our top pick in the domestic technology sector.

Under the agreement, GHL will serve as a merchant acquirer for UnionPay International and JCB International cards in the Philippines. The company expects to start deploying its point-of-sales terminals in first quarter of financial year 2015 (1QFY15), and is targeting to sign up 300 to 500 merchants per month to accept payments using UnionPay and JCB cards.

Also, the management is still confident of securing its TPA arrangement in Malaysia this year.

We are positively surprised by GHL’s appointment as a TPA acquirer for UnionPay and JCB in the Philippines, as we were expecting a TPA arrangement with a bank which is still awaiting regulatory approval.

Nevertheless, we believe this will help GHL to kick-start its TPA operations in the Philippines. We understand that about 65% of the country’s population is not covered by the banking system, which explains the 27 million prepaid card issuances versus only eight million credit cards.

This is positive for GHL as UnionPay and JCB cards are predominantly used for making prepaid payments in the Philippines. Moreover, Omnipay plans to issue six to eight million cards under the UnionPay and JCB brands in 2015, versus 2.7 million currently; this should help GHL’s merchant acquiring process.

Our suggestion is to accumulate the shares. The stock had a good run early this year, but is now down 35% from its year-high of 91 sen. We think the pullback offers an attractive buying opportunity, in view of its strong TPA-driven earnings growth. Overall, we think GHL’s growth prospect is intact and are confident of its execution strategy. — CIMB Research, Dec 16

Friday, November 28, 2014

GHL SYSTEMS BHD (0021 GHLSYS) - CIMB

Trading ideas – STOCK PICK (summary from various Research Reports)

GHL SYSTEMS BHD (0021 GHLSYS)

Current Price : RM 0.73

Target Price : RM 1.06( BUY)

Source : CIMB

• 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.

• GHL posted a higher core net profit of RM2.4m vs RM2m in 3Q13, after accounting for a RM0.6m one-off inventory adjustment.

• 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.

• It was expected GHL's annuity based revenue to increase further when its credit card TPA business in Malaysia, Philippines and Thailand become operational.

• 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.

• RM1.06 target price is 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).

Thursday, November 27, 2014

YFG’s RM255.9mil condo job in Sabah terminated (Star)

YFG Bhd’s RM255.9mil contract for the commercial and 27-storey waterfront condominium property project in Sabah has been terminated by Palikota Sdn Bhd.

The company said on Wednesday its unit YFG Trolka Sdn Bhd had received a notice from Palikota on Nov 19 informing it that the contract, awarded on Aug 1, 2013, had been terminated.

The contract was for the construction of Jesselton Residences Waterfront along Jalan Haji Saman in Kota Kinabalu...

In the latest development, YFG Trolka had written to Palikota argued that it was an invalid notice of termination and will treat it as repudiation of contract and accepted the repudiation and be excused from further performance and will sue Palikota for damages for breach. 

YFG Trolka had filed in the application for an ex parte interim injunction at Kuala Lumpur High Court to injunct Palikota from calling on the performance bond.

The Kuala Lumpur High Court had on Tuesday granted an injunction against Palikota to restrain it from calling on the performance bond issued by the bank until YFG Trolka's claim is heard and disposed by the Court.

The court fixed the inter-parte hearing for the injunction application on Dec 9, 2014.

KNM falls 4% on downgrade amid lower oil prices (Edge)

KNM Group Bhd fell as much as 4% after analysts downgraded their target price (TP) for shares in the process equipment manufacturer amid lower oil prices. The downgrade was despite KNM reporting stronger third quarter financials.

At 9.14am, KNM was traded at 57.5 sen with some 12 milion shares done. KNM, which became the bourse's most-active stock, had earlier fallen as much as 2.5 sen to RM56.5 sen.

For comparison, the FBM KLCI rose 1.03 points or 0.1% while oil and gas (O&G) companies like SapuraKencana Petroleum Bhd fell eight sen or 2.5% to RM3.15.

Yesterday, KNM reported that net profit rose 160% to RM16.44 million in the third quarter ended September 30, 2014 from RM6.32 million a year earlier.

Cumulative nine-month (9MFY14) net profit was higher at RM41.73 million from a year earlier.

Today, Hong Leong Investment Bank Bhd wrote in a note that KNM's 9MFY14
core profit of RM52 million was in line with forecast. The figure constituted 79% and 78% of Hong Leong's and consensus forecast respectively.Hong Leong, however, lowered its TP for KNM shares to 98 sen from RM1.35 previously.
According to Hong Leong, the lower TP for KNM is "in line with our target P/E de-rating for O&G companies due to weak sentiment amid declining oil price.