GHL System Berhad Annual Report 2017

GHL SYSTEMS BERHAD 16 MANAGEMENT DISCUSSION AND ANALYSIS CONT’D 2. DISCUSSION AND ANALYSIS OF THE FINANCIAL RESULTS AND CONDITIONS (cont’d) Analysis of Financial Results (cont’d) 2.6 Liquidity and Capital Resources (cont’d) (iv) The Group increased its share capital by RM4.5 million (2016 – RM2.0 million) due to the issuance of 4.72 million shares upon the exercise of employees’ stock options and the resale of 737,000 treasury shares. 2.7 Trends and Events The Group continues to benefit from initiatives undertaken by regulators in the region to convert cash retail payments into electronic payments. In Malaysia, Bank Negara has set a target of 800,000 EDC terminals to be deployed by 2020. This has encouraged Banks to partner with the Group to deploy new EDC terminals either under the TPA business model for smaller merchants or a referral and rental model for larger merchants. The directive has also brought about opportunistic sales of hardware and software to support the Banks in their drive to achieve this regulatory target. A growing acceptance point base will further encourage the usage of e-payments (especially debit cards which have a relatively high penetration in Malaysia and Thailand). Similar persuasive initiatives have been undertaken by regulators in Thailand and the Philippines. The Thai central bank has further encouraged the growth of the EDC terminal base to support initiatives such as PromptPay to enable simple and low cost e-payment options to the consumers. Similarly, in the Philippines, the central bank has commence the need to deploy EMV enabled terminals which will lead to opportunities to replace and grow the existing terminal base. The drive to a cashless society has also significantly increased the use of domestic direct debit card payments (i.e. ATM card payments) in the region. The Group is a member of the Malaysian direct debit card association and has benefitted from increased transactional throughput as more and more non-credit card holders utilise their debit cards for payment. We expect that regulators will continue to drive the use of electronic payments throughout the region by increasing the number of merchant acceptance points and by promoting debit cards and non-card electronic payments to the mass population that is ineligible for credit cards. These initiatives are entirely congruent with the Group’s strategy and will certainly help provide sustainable growth going forward. The recent announcements by industry players in our three key markets of Malaysia, Thailand and Philippines of their plans to launch e-wallets further underpins the move towards a cashless society. The opportunities accorded in these multiple e-wallet deployments will also provide the group with opportunities to enable our existing merchant base as well as new ones to start accepting e-wallets as a mode of payment.