GHL expects business volume to double after acquisition of e-pay

by **Cals** Mon 07 Apr 2014, 16:47

Business & Markets 2014

Written by Charlotte Chong of theedgemalaysia.com

Monday, 07 April 2014 10:11

BANGKOK: The acquisition by GHL Systems Bhd of Australia-listed electronic payment service provider e-pay Asia Ltd will create a group that is at least double in size in terms of revenue and earnings, said GHL Systems chief executive officer and executive director Kanagaraj (Raj) Lorenz.

In a recent interview with The Edge Financial Daily Raj said the potential of cross-selling between the two entities is huge.

“We can bring e-pay into markets like Thailand and the Philippines and certainly into our own terminal base in Malaysia. Obviously, both the companies have synergies in terms of online operations, tactical engineering, software development and so forth. This helps us to fast track our growth,” he said.

GHL Systems operates three core businesses — shared services, solutions, and transaction payment acquisition (TPA). Through a takeover offer, the company acquired more than 96% equity interest in Australia-listed e-pay in February and subsequently acquired the remaining shares through compulsory acquisition.

The takeover valued e-pay at A$22.77 million (RM69 million) and was to be settled with e-pay shareholders opting to receive cash or shares in GHL Systems in exchange.

Simon Loh, GHL Systems’ major shareholder, owns 61.6% of e-pay. Through the takeover exercise, Loh swapped his interest in e-pay with new shares in GHL Systems, thus upping his stake in GHL Systems from about 30% previously to 46.05%.

Driven by the e-pay takeover, GHL Systems’ share price rose 39% from 72 sen in the beginning of the year to RM1 last Friday, giving it a market capitalisation of RM416.9 million.

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Raj: Obviously, both the companies have synergies in terms of online operations, tactical engineering, software development and so forth. This helps us to fast track our growth.

Still, GHL Systems’ earnings remained modest for the financial year 2013 ended Dec 31 (FY13), with a net profit of RM5.26 million on revenue of RM64.03 million. Both net profit and revenue rose 20.5% and 20.7%, respectively, from FY12. Meanwhile, according to Bloomberg, e-pay registered a net profit of A$1.2 million for FY13 ended Dec 31, from A$2.1 million in FY12.

To justify a market capitalisation of over RM400 million, market observers said the group’s earnings would have to grow faster.

Nevertheless, GHL Systems has been penetrating new markets in the region to attain faster growth. Last Thursday marked another milestone with the group launching its TPA services in Thailand with Thanachart Bank, Thailand’s sixth largest bank by assets.

The TPA service will enable GHL Systems to directly contract with merchants to provide credit card payment services, with Thanachart Bank acting as the underlying bank that will obtain authorisation for the credit card transactions.

Thanachart Bank senior vice-president Jean-Marc Dallaire said the agreement with GHL Systems would enable the bank to expand its merchant base in order to capture a bigger slice of the credit card transaction volume in the country.

“We are a very small bank with 622 branches which we use as acquisition channels [to sign up merchants], but that’s not enough. It’s a very demanding market and we need to look at other models in order to maximise and grow the merchant base and transaction volumes,” said Dallaire, adding that Thanachart Bank currently has 7,000 to 8,000 merchants. “I am sure that GHL Systems is able to pump up the volume.”

To date, Thanachart Bank has issued 700,000 credit cards and a total of 1.7 million cards including debit cards, “This is the engine to grow the bank,” said Dallaire.

Raj is eyeing 1,000 to 2,000 merchants in Thailand within 10 months. “There are about two million businesses in Thailand currently and the credit card penetration is incredibly low ... There’s an opportunity to convert many of them to electronic payment, particularly the smaller merchants.”

Although only five million Thais are eligible to apply for credit cards — with 18 million credit cards issued in total at the moment in Thailand — both GHL Systems and Thanachart Bank believe the high inflow of tourists will support the fast growth of e-payments in the country.

This article first appeared in The Edge Financial Daily, on April 7, 2014.