GHL's acquisition of e-pay Asia deemed positive

by **Cals** Wed 09 Oct 2013, 01:44

Published: Tuesday October 8, 2013 MYT 12:00:00 AM
Updated: Tuesday October 8, 2013 MYT 11:07:52 AM
GHL's acquisition of e-pay Asia deemed positive
BY NG BEI SHAN
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Raj Lorenz
KUALA LUMPUR: The proposed acquisition of e-pay Asia Ltd (EPY) by GHL Systems Bhd has excited investors as its share price jumped 28% or 13.5 sen to 61 sen in a day after it resumed trading.
Analysts favoured the deal as they expect the acquisition to be earnings accretive to the group after the consolidation and concurrently strengthen the payment service provider’s foothold in Malaysia.
When combined, the enlarged entity’s revenue and market capitalisation would double, an analyst opined.
Group chief executive officer and executive director Raj Lorenz (pic) told StarBiz the deal would see the GHL’s recurring income jump to between 80% and 90% from 70% presently in anticipation of the enlarged group’s bigger contribution from the transaction payment acquisition (TPA) segment.
“This deal splits our group revenue very evenly into banks, telcos and merchants… From a second perspective, EPY’s revenue is almost 100% annuity revenue.
“One of the things I have been pressing really hard for in GHL is to forgo one-time sales of hardware and software in favour of recurrent revenue stream. With this deal, our revenue stream which was previously 70% annuity, 30% non-annuity… will now be 80% to 90% recurrent (income),” he said.
To recap, GHL had on Friday proposed to acquire all shares in EPY for RM68.9mil or RM1.21 apiece. EPY shareholders can also opt for 2.75 GHL shares for each EPY share held. Trading in GHL shares was halted on Thursday pending the announcements by the company.
GHL traditionally liaises directly with banks but with the proposed acquisition, it was able to tap into the pool of merchants that EPY deals directly with.
On top of that, it would also be able to cross-sell services and products given the synergistic business of the two as well as broaden and diversify its customer base.
As EPY’s revenue was almost solely contributed from Malaysia, its marriage with GHL would see it leveraging on the latter’s TPA presence in Thailand and the Philippines.
Asked why the transaction was decided now, Lorenz said EPY had in July bought out the 40% stake that Euronet Worldwide Inc owned in its subsidiary, e-pay (M) Sdn Bhd for A$8mil (RM24mil).
Hence, it is more straightforward to acquire EPY after it wholly owns the unit that is EPY’s core income contributor.