KUALA LUMPUR: As GHL Systems Bhd’s share price was climbing towards its historical high of slightly above RM1.20, there came the news that the company’s substantial shareholder Creador, a private-equity fund, had sold its entire equity interest of 28.3% at RM1 per share.
In addition, its majority shareholder Simon Loh had disposed of almost half of his shareholding at the same price.
The announcements on the share sale put a cap on GHL’s share price instantly as the shares changed hands below market price. The stock slipped nine sen or 7.56% to close at RM1.10 last Friday.
Substantial shareholders selling shares usually raises eyebrows. However, in this case, it might not be a bad sign at all. This is because the shares were sold to London-based Actis, which has a growing portfolio of investments across Asia, Africa and Latin America.
After acquiring a 44.4% stake, Actis is currently making a mandatory general offer to the minority shareholders at RM1 per share.
GHL chief executive officer (CEO) Danny Leong, who took over the helm in November, told The Edge Financial Daily in an email that the changes in shareholdings will not affect the company’s direction and operations.
“I am not speaking on behalf of the two shareholders. Based on their comments in the press release, Creador sold to crystallise its 2.8 times gain on its investment in GHL, which is understandable given its objective as an investment firm.
“As for Simon Loh, I understand that he was approached because the new shareholder, Actis, wanted a larger position in GHL and after evaluating, Simon saw Actis as a strategic partner that could help GHL reach greater heights. And note that he remains the second-largest shareholder with a substantial stake of 19%,” Leong commented.
“With the experience and expertise in payments globally, Actis is able to contribute in our strategic direction in further cementing our position in Asean. With their reach and access to emerging payment technologies, we believe their input will be beneficial to GHL as we remain focused on being the leading Asean payment service provider,” he added.
Commenting on the transaction price, Leong said that GHL’s share price is undervalued given the company’s growth momentum and its foothold within Asean. We believe the shareholders started the talks a few months back when the share price was below RM1. “The decision to transact at RM1 was solely agreed between the shareholders at that time and not fixed yesterday or a few days earlier.”
Volume grows despite soft retail sales
According to Leong, GHL is not affected by current weak consumer sentiment.
“We are actually seeing our transaction volume increasing [despite the weak retail sales] because people are embracing electronic payments (e-payments) more and more,” he said.
Leong explained that Bank Negara Malaysia (BNM) has issued frameworks and mandates to accelerate the nation’s migration to e-payments, one example of which is the Financial Sector Blueprint 2011-2020.
Under the blueprint, the central bank wants to increase the number of e-payment transactions per capita from 44 transactions in 2010 to 200 transactions by the end of 2020, ultimately increasing demand for e-payment solutions across the nation.
According to Leong, the card payment services division recorded an increase in transaction value of 35.7% in 2016 to RM2.7 billion from RM1.98 billion seen in the previous year, while its e-payment division grew 9.7% to RM3.63 billion in 2016 from RM3.31 billion seen previously.
“[The combined total] of online transactions and card payment transactions [under the transaction payment acquisition (TPA) segment] reached RM6.2 billion for 2016,” Leong said.
He noted that BNM’s move to encourage cashless transactions is strong force to drive GHL’s business volume. This will certainly offset the weak retail sales in the current slowdown.
The group’s net profit for the fourth quarter ended Dec 31, 2016 swelled 38.3% to RM4.4 million from RM3.2 million in the previous year’s corresponding quarter, while its revenue jumped 17.9% to RM67.2 million from RM56.9 million a year ago, mainly due to growth in its shared services and TPA segments.
For the full financial year 2016, its annual net profit ballooned to RM18.1 million, or 2.79 sen per share, from RM10.34 million, or 1.61 sen per share, the year before. Revenue grew 16% to RM245.9 million from RM211.38 million.
Rising competition
BNM’s cumulative target of 430,000 new point-of-sale terminals for 2017 opens up a window of opportunities for GHL. On the other hand, there is also competition for the company, as commercial banks are competing to meet these numbers, providing customers with their respective e-payment services.
Leong pointed out that GHL is targeting 1,000 new merchant acquisitions per month this year.
He acknowledges that there will be ongoing competition as the group moves forward, but GHL intends to set itself apart by offering additional value-added services such as its partnership with Alipay in Thailand, under which GHL is in charge of acquiring Thai merchants to accept Alipay payments from Chinese tourists in Thailand.
“We do see some competition, especially in Malaysia, because of the [BNM targets], but how we mitigate this is that we [offer additional services] such as e-pay and Alipay in Thailand,” he added.
The group also announced in early March that it has teamed up with CIMB Group Holdings Bhd to provide card payment services for CIMB’s corporate clients in Thailand’s retail and services segments.
On prospects, Leong said that he would like to maintain the group’s double-digit growth momentum, and he is fairly confident that it will achieve this.