KUALA LUMPUR: Maybank Investment Bank (IB) has maintained its “buy” call for CTOS Digital Bhd with an unchanged target price of RM1.92 on the expectation of a stronger second-half earnings momentum.
In a note, the research bank said CTOS’ earning momentum should pick up in the second half on a combination of accelerated pace of recovery for the local commercial segment; higher associate profits; potentially further tax write-backs; and sustained strong performance from both key account and direct-to-consumer segments.
“Additionally, the forecast strong revenue growth should outpace the ongoing investments in talents as CTOS ramps up its research and development and selling and marketing activities,” it said.
Maybank IB said the activities on new account activation have improved 18 per cent in the second quarter (Q2) versus the first quarter (Q1) as physical sales and marketing activities normalised.
“Management also made a six per cent price adjustment on selective clients as part of its strategy to upsell some products.
“It expects sequentially stronger revenue growth in the second half beyond the five per cent in previous half year through ongoing upselling activities, as well as higher small and medium enterprise accounts activation,” it said.
The research bank noted that CTOS’ higher pricing on its credit scoring and IDGuard products of between 60% and 70% higher relative to Experian, as well as Bank Negara Malaysia’s introduction of e-CCRIS in February 2022 had no effect on the strong direct-to-consumer revenue growth trajectory.
In addition, the completion of the acquisition of a 49 per cent stake in JurisTech has provided cross-selling opportunities and also enabled greater integration of Juris’ digital credit lending systems with CTOS’ credit scoring, analytics and identity verification solutions.
Maybank IB said among the company’s upside includes greater marketing efforts amid an improved economic situation with the launch of digital solutions and the penetration of new sectors to spur faster adoption and demand for CTOS digital’s services.
Regional expansion or mergers and acquisitions can further broaden the group’s reach and market share, the research house said.
Meanwhile, CTOS’ downside includes slower-than-expected economic growth; breaches in security/compliance that could result in the revocation of its Credit Reporting Agency Certificate or breaches of the Personal Data Protection Act; and the entry of new players into the credit reporting space. – BERNAMA
