GHL Systems Berhad (‘GHLSYS’) is involved in developing and selling software programs, sale and rental of electronic data capture (EDC) equipment and its related software and services. Its busineses can be grouped into 3: Transaction Payment Acquisition, Shared Services & Solutions.
GHLSYS's 3 main businesses
Recent Financial Performance
GHLSYS's financial performance has improved tremendously in the past 2 years. Its PBT went above RM10 million in FY2014 and its revenue soared above the RM100 million mark. In FY2015, PBT rose 45% to RM16 million while revenue surpassed the RM200 million mark.
Chart 1: GHLSYS's last 14 years P&L
Recent Financial Performance
When we zoomed into the quarterly results, we can see that the big jump in its top-line and bottom-line happened in QE30/6/2014. That's when the group completed its acquisition of e-pay Asia. (Note: The acquisition of e-pay Asia, which was announced in October 2013, triggered an upside breakout of a triangle and the rally that ensued sent the share price to RM1.25-1.30 in 2015).
Table: GHLSYS's last 14 quarters P&L
Chart 2: GHLSYS's last 14 quarters P&L
Financial Position
GHLSYS's financial position as at 31/3/2016 is deemed healthy with current ratio at 2.6x and total liability to equity at 0.3x.
Valuation
GHLSYS (closed at RM0.835 yesterday) is now trading at a PER of 48x (based on last 4 quarters' EPS of 1.75 sen). Based on earnings CAGR of 55% over the past 2 years, PEG ratio is still below 1. Like MYEG, GHLSYS's valuation is deemed 'reasonable' for a growth stock.
Technical Outlook
As noted earlier, GHLSYS rallied to a high of RM1.25-1.30 in May 2015. Thereafter, it dropped back and broke its uptrend line, SS at RM0.90. The stock can expect strong support from the horizontal lines at RM0.70 & RN0.60.
Chart 2: GHLSYS's monthly chart as at May 31, 2016_12.30pm (Source: Shareinvestor.com)
Zooming into the weekly chart, we can see that the stock is trending lower in an irregular downward channel ('RR, R1R1"). Its immediate support will be the horizontal lines at RM0.70-0.73 & RM0.60.
Chart 3: GHLSYS's weekly chart as at May 31, 2016_12.30pm (Source: Shareinvestor.com)
Conclusion
Based on good financial performance & position and 'reasonable' valuation for a growth stock, GHLSYS could be a good stock for long-term investment. Slow accumulation should be the approach and that may begin at RM0.70 mark.
Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, GHLSYS.
Well explained Alex. What you think about Solution?
ReplyDeleteHi InvestSmart
ReplyDeleteSolution is shaping to be a steady performer over the past 3 years. Revenue and PBT are good at RM30 million & RM7 million a year each. With EPS of about 3 sen, the stock is now trading at a fair PER of 15x.
Its earnings seem to be capped at RM2.4-2.5 million a quarter and, until it has broken above this level, the current price of RM0.43-0.45 could be the ceiling for the share price.
If you are looking to buy into this stock, try to get in at the uptrend line support of RM0.36. If you have the stock, it may be a good idea to take some profit at the current price.
Good luck.