Digital banks key to CTOS Digital’s future revenue


However, it really depends on the digital banks if they want to use CTOS or prefer leveraging on their own proprietary data analytics to create their own credit assessment for their portfolio of customers.

PETALING JAYA: CTOS Digital Bhd’s future revenue upside could come from the five digital banks if they decide to use its comprehensive data solutions.

The amount may match the total revenue it gets for providing services currently to its five largest customers of about RM20mil per annum. This will be about 10%-12% of the financial years (FY) 2022-2024 revenue.

However, it really depends on the digital banks if they want to use CTOS or prefer leveraging on their own proprietary data analytics to create their own credit assessment for their portfolio of customers.

In that way they can minimise the cost of customer acquisition, said Maybank IB Research. A total of 29 applicants are vying for five digital banking licences in the country.

Bank Negara is expected to announce the winners by the end of this month.

Maybank said the target market of digital banks are the unbanked and under-banked segments which still make up a large portion of the market, at 55% of the total population, according to Bain & Co, Google and Temasek Research.

Given the target market, the upside lies on higher transaction volumes, which may necessitate high-frequency access to a credit database, something CTOS could very well provide through its credit assessment solutions, it said.

That aside, Maybank IB Research trimmed its FY22-24 earnings by about 2% to factor in recent developments on its share placement and acquisition exercises. CTOS issued 110 million new shares (5% of share base) from the recent private placement exercise, raising RM173.8mil at RM1.58 per share.

The amount raised was lower than originally planned, as the group plans to also tap borrowings to cover the shortfall, though it is positive about the acquisitions.

It said the share price has fallen by 13% year-to-date due to the broader market weakness. It believes CTOS is well-positioned to benefit from ongoing demand for credit assessment solutions from both commercial and retail segments.

The house maintains its “buy’’ call with a lower target price of RM2.17 a share but it is still based on 2.3 times price and earnings-to-growth ratio multiple.

However, it also cited risk to its call.

This includes emerging competition from smaller players that may cap business opportunities among new avenues such as challenger banks and digital moneylenders. It said increasing cybersecurity threats as adoption of the digital economy rises within the region, which may lead to disruption in data access of CTOS’ partners and thus impeding the continuity of CTOS’ businesses.

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