GHL System Berhad Annual Report 2019

A N N U A L R E P O R T 2 0 1 9 15 3. PERFORMANCE BY BUSINESS SEGMENT AND GEOGRAPHY (Cont’d) 3.1 Performance By Business segment (Cont’d) a) Transaction Payment Acquisition (“TPA”) Segment (Cont’d ) (ii) GHL (electronic payment services) This electronic payment services business is driven by TPA arrangements with leading domestic banks in respective markets as well as a leading China e-wallet provider which is expanding into ASEAN. The existing GHL TPA data, as shown in Table 2, comprises the following activities: a) Various MDR revenue sharing arrangements under direct contracts with merchants and banks in Malaysia, Thailand, and Philippines. b) Malaysian domestic debit card (“MyDebit”) merchant acquisition. c) Internet TPA (“eGHL”). d) e-wallet providers. A summary of key data relating to the electronic payment business is found in Table 2 below. While transaction payment value grew strongly at +56.2%, transaction margin declined YOY due to downtrend of MDR, in line with lower interchange fee imposed by regulators and ongoing competition in the market, in terms of monthly rental. Over the longer term, however, margin should stabilise as more merchants are onboard and a larger portfolio is built as overseas TPA in Philippines and Thailand gather momentum. The introduction of domestic e-wallets in all three markets in 2018 contributed positively in 2019 and this trend is expected to continue going forward. Table 2 GHL Electronic payments TPA (All stated in RM'millions unless stated otherwise) Transaction Payment Value (Note 1) 6,279.9 9,810.0 56.2% Gross Revenue 57.6 77.3 34.2% Gross Revenue / Transaction Value (Note 2) 0.9% 0.8% -14.1% Gross Profit (Note 3) 23.7 31.9 34.4% Gross Profit / Transaction Value (Note 2) 0.4% 0.3% -14.0% Merchant Footprint - TPA Only (Thousands) 58.7 95.3 62.5% % change YTD 2018 (Restated) YTD 2019 Note 1 – The 2018 Transaction Payment Value includes transactions relating to Philippine’s Bancnet transactions which were previously omitted in 2017, which has been restated. Bancnet inclusion commenced only in 2017 due to regulatory changes. Note 2 – Gross Revenue or Gross Profit respectively divided by the Transaction Payment Value expressed as a %. Note 3 – The gross profit has been restated as a result of changes in indirect costs allocation basis due to required improvements to our internal business processes to include certain network service and compliance fees, as well as support expenses relating to the TPA business that were previously included in the administrative operating expenses. This reclassification from operating expenses to cost of goods sold is intended to more accurately reflect the gross margins of this e-payment TPA segment. MANAGEMENT DISCUSSION AND ANALYSIS CONT’D