PETALING JAYA: CTOS Digital Bhd
is positioning itself to capture further growth opportunities across Asean, supported by rising demand for sophisticated credit solutions and a robust innovation pipeline, even as near-term earnings face pressure from higher costs, margin contraction and tax changes.
Following the company’s weaker- than-expected first quarter of financial year 2025 (1Q25), Maybank Investment Bank Research (Maybank IB) adopted a more cautious stance, trimming CTOS’ earnings forecasts for 2025 to 2027 by 5% per annum.
“Although we trim 2025 to 2027 forecasts by 5% per annum and migrate to a price-earnings ratio (PER) methodology to better account for CTOS’ future growth profile, we continue to like CTOS for its market leading position, robust product portfolio and strong execution,” it said.
Maybank IB maintained a “buy” call on CTOS, but lowered its target price to RM1.30, pegged to 22 times forward PER.
The brokerage pointed out that CTOS’ 1Q25 results were dragged down by “various cost rationalisation expenses that is expected to accrete by late second half of this year”.
Despite a 6% year-on-year (y-o-y) increase in group turnover driven by strong growth in the direct-to-consumer (plus 42% y-o-y) and international (plus 21% y-o-y) segments, earnings before interest, tax, amortisation and depreciation margins contracted by 11 percentage points y-o-y due to ongoing restructuring efforts, including workforce rightsizing and sales development exercises.
Nonetheless, there were bright spots, with associate profit climbing 54% y-o-y, primarily driven by a 63% surge in contributions from JurisTech.
Maybank IB expects the momentum in the direct-to-consumer, international, and JurisTech order book segments to continue to accelerate over subsequent quarters.
RHB Research also remained positive on CTOS’ medium-term prospects, citing the large total addressable market in Asean and ongoing digitalisation efforts.
“Growth opportunities remain abundant, supported by sustained demand from financial institutions for more sophisticated credit analysis solutions.”
