CTOS to gain from digital-lending solutions

Hong Leong Investment Bank Research (HLIB) maintained a “buy” call on CTOS with a target price of RM2.45.

PETLING JAYA: CTOS Digital Bhd looks set to continue fuelling its growth by increasing its stake in RAM Holdings Bhd and Thailand-based associate Business Online Public Company Ltd (BOL) as well as the synergistic acquisition of financial technology (fintech) specialist, Juris Technologies Sdn Bhd (JurisTech).

Kenanga Research, in its latest report, said it believed that CTOS would be focusing on integrating JurisTech into the company this year, and to combine their capabilities in creating end-to-end digital lending solutions.

“It also stands to benefit from the long-term trend of enterprises’ digitalisation of customer on-boarding process.”

The research house maintained a “market perform” reccomendation on the group with a target price of RM1.85.

“We believe that CTOS continues to enjoy numerous long-term tailwinds.

“At its current price, we believe that near-term upside is limited as trading valuations of 52 times estimated FY2022 price earnings ratio (PER) may appear fair at the moment,” it added.

Given the current climate, where investors may shun or rotate out of high-PER stocks amid current market conditions, Kenanga Research recommended accumulating at weakness at levels “where capital upside is more favourable as the stock remains fundamentally intact”.

Meanwhile, Hong Leong Investment Bank Research (HLIB) maintained a “buy” call on CTOS with a target price of RM2.45.

The research house said CTOS is poised to ride on the bright prospects of the Asean credit reporting industry.

The group is the leading credit rating agency in Malaysia with an estimated market share of 71.2% in 2020.

CTOS also has over three decades of history with domestic banks and financial institutions and the nature of its business is somewhat cushioned by an exceedingly high barrier to entry, HLIB said in its latest report.

The research house made no changes to its earnings forecasts on CTOS as it awaits the completion of all the corporate exercises including the one involving JurisTech Group and the ongoing private placement.

RHB Research noted that the imminent fund-raising for CTOS’ acquisitions may cap its share price appreciation in the short-term.

“However, we remain positive on CTOS’ growth prospects given its unique proposition to capture opportunities in the secular digitalisation trend and the fintech space.

“The imminent acquisitions should accelerate growth via new solutions and collaborations,” added the research house.

RHB Research has kept its “buy” call on CTOS with an unchanged target price at RM2.40.

On the group’s outlook, the research house said CTOS management remained bullish on its FY22 growth outlook.

This is given higher demand for its various digital solutions and analytical insights such as comprehensive portfolio reviews, CTOS e-KYC and CTOS Application & Decisioning from key accounts.

RHB Research also said the group’s commercial and direct-to-consumer segments should continue to grow through new account activations, along with higher adoption and improved awareness of financial literacy among SMEs and individuals.

The imminent merger and acquisition should accelerate its growth plans and move it up the value chain in building an end-to-end digital lending solution.

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