PETALING JAYA: Credit reporting company CTOS Digital Bhd
is expected to continue optimising its cost structure while at the same time focusing on exiting less profitable businesses and expanding its Asean footprint, analysts say.
The company’s second quarter of financial year 2025 (2Q25) results released last Friday came in below market expectations.
However, most analysts believe the worst may be over in terms of share price valuation given the decline year-to-date, the more conservative financial estimates made by the company’s management following its 2Q25 results, and the ongoing growth in its Asean customer base, as well as the offering of new products.
RHB Research has cut earnings assumptions for CTOS for this year to 2027 by 26.5%, 26.4% and 24%, respectively, after factoring in slower growth across all segments and margin assumptions.
While maintaining a “buy” call on the stock, the research house revised its target price to RM1.16 from RM1.49.
“Management has lowered its multi-year internal growth outlook to provide a new baseline guidance.
“While the plateauing growth trajectory may keep investors at bay, its valuation has reverted to a palatable level,” RHB Research said.
Hong Leong Investment Bank (HLIB) Research said that despite 2Q25 results coming in below market expectations, the decline in share price means that the stock’s risk-reward profile has become more balanced.
“Overall, we are still optimistic that Asean continues to be an under-penetrated market, and CTOS is well-positioned to capitalise on the region’s compelling growth potential,” the research house said.
“Broadly, management is focused on phasing out less profitable products and optimising costs in order to restore gross profit margins back to the 70% range from the current 67%.
“Furthermore, CTOS aims to deepen its penetration into the large corporate segment, an area where it is lagging,” HLIB Research said.
The research house retained a “hold” call on the stock with the target price lowered to 89 sen from RM1.10.
Maybank Investment Bank Research (Maybank IB) also revised the company’s 2025 to 2027 earnings down by between 27% and 31% to reflect the weaker-than-expected margins and muted earnings visibility.
The research house also downgraded the rating for CTOS to a “hold” from a “buy” and lowered the target price to 92 sen from RM1.30.
Maybank IB said there could be a rerating potential after 2026 as cost rationalisation efforts and client wins should drive growth. It added that the search for a new chief executive officer “is ongoing, with a candidate currently in the final stages of evaluation”.
It said the company’s management has guided for a 27% cut in this year’s earnings.
CIMB Research, which downgraded the stock to a “hold” from a “buy”, has lowered its target price on CTOS to 90 sen from RM1.30.
The research house said the valuation was also based on the company’s sluggish earnings growth outlook and the structural shift in its earnings profile in view of the unfavourable sales mix weighted towards lower-margin products and a higher tax rate beyond October 2026.
CTOS’s pioneer tax status is set to expire in November 2026.
