KUALA LUMPUR: RHB Research expects GHL Systems to record stronger numbers for the second quarter (Q2), supported by domestic retail spending and the growing trend of cashless transactions.
Its analyst Lee Meng Horng noted that Q2 results should see an improvement, especially in transaction payment acquisition (TPA), following the growth in retail spending due to various cash assistance measures such as the Employees Provident Fund special RM10,000 cash withdrawal scheme.
"Retail Group Malaysia (RGM) expects the retail industry to grow by 25.7 per cent year-on-year (YoY) in Q2 2022, with contributions coming mainly from strong sales during the Aidil Fitri festival.
"RGM has also increased its annual retail industry growth forecast to 13.1 per cent YoY, from 6.3 per cent.
"This should sustain the overall total processed value (TPV) growth trend for GHL, as society moves towards more cashless transactions, as seen in recent years," said Lee.
The company reported a revenue of RM92.6 million, up 6.8 per cent YoY, in Q1 and a net profit of RM5.3 million, which was down by 8.8 per cent YoY.
The higher revenue was driven by the TPA division from all the geographical segments, as lockdown measures eased in tandem with the progress of vaccination rates.
However, the firm noted that the net profit contracted due to a lower margin for the acquirer business, in both TPA and e-pay, as a result of changes in the merchant mix and product mix—amid the further relaxation of lockdown measures.
"We believe the full reopening of the economy and borders should help boost the overall TPA business in Thailand and Malaysia.
"Although global inflationary pressures may cap the growth in spending, we believe domestic consumption is still on track to increase YoY, given the low base effect in 2021, and as pressure is cushioned by various subsidies," said Lee.
The firm upgraded the stock to 'Buy', as value has emerged following the recent share price weakness.
It said the counter is now trading below the five-year mean.
The target price for the stock dropped to RM1.54.