GHLSYS: Earnings Improved

Results Update

In QE30/6/2016, GHLSYS's net profit rose 8% q-o-q or 72% y-o-y to RM4.7 million while revenue rose 12% q-o-q or 26% y-o-y to RM62 million. Revenue rose y-o-y by RM12.7 million primarily driven by increase in the TPA, Shared Services and Solutions Services divisions of 14.1%, 27.6% and 82.3% respectively. Net profit margins during this quarter improved due to a more normalized tax rate as compared to 2Q15, as well as improved operating margins and lower interest expenses. 


Table: GHLSYS's last 8 quarters P&L


Chart 2: GHLSYS's last 15 quarters P&L
 
Valuation

GHLSYS (closed at RM0.84 yesterday) is now trading at a PER of 41x (based on last 4 quarters' EPS of 2.05 sen). Based on average earning CAGR of 45% over the past 2 years, PEG ratio is still below 1. Thus, GHLSYS's valuation is deemed acceptable for a growth stock.

Technical Outlook

GHLSYS broke above the horizontal line at RM0.30 in 2013 and rallied to a high of RM1.25-1.30 in May 2015 (right after the start date of GST in Malaysia). Thereafter, it dropped back and found support at the 30-month EMA line at RM0.80. In addition, it has support from the horizontal lines at RM0.70 & RN0.60.


Chart 2: GHLSYS's monthly chart as at Sep 2, 2016 ( (Source: Shareinvestor.com)

Zooming into the weekly chart, we can see that the stock is trending lower in a downtrend line with resistance at RM0.95. An upside breakout above this downtrend line could signal the continuation of its prior uptrend.


Chart 3: GHLSYS's weekly chart as at Sep 2, 2016 (Source: Shareinvestor.com)

Conclusion

Based on good financial performance and 'acceptable' valuation for a growth stock, GHLSYS could be a good stock for long-term investment. Good entry is at RM0.70.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.