PETALING JAYA: CTOS Digital Bhd
is transitioning from a traditional bureau into a platform-centric intelligence provider, leveraging demand from fraud-related segments to target a 10%-12% compound annual growth rate (CAGR) in revenue.
Hong Leong Investment Bank (HLIB) Research said this shift is increasingly anchored on deeper system integration within client workflows, moving away from purely transactional report sales.
Notably, administrative expenses rose 14.1% year-on-year in financial year 2025 (FY25), underpinned by front-loaded investments in cloud migration and artificial intelligence or AI enablement.
These outlays are strategically aimed at embedding CTOS’ capabilities directly into lending ecosystems to enhance client stickiness, the research firm said in a note to clients.
“Looking ahead, management guides for a 10% to 12% three-year revenue CAGR, underpinned by robust cross-selling of decisioning tools and data analytics.
“While near-term margins have been diluted, the group targets a cost-to-income ratio of 40% to 43% by 2028 as operational efficiencies materialise, which should drive return on equity expansion towards the 16% to 18% range post-investment cycle.”
Backed by structurally rising demand for fraud detection, the group, which offers credit reporting, software development, and digital software-related services, is also accelerating its expansion into both banking and non-bank financial segments.
“The impending Consumer Credit Act 2025 serves as a key inflection point, mandating non-bank lenders to formalise credit data – effectively strengthening CTOS’ total addressable market, in our view.
“The group is well-positioned to capitalise on this via its proprietary Fraud ID Guard platform (it remains the sole provider) and its established alternative data capabilities. This strategic pivot deepens client engagement and enhances revenue quality through more recurring, embedded income streams,” said HLIB Research.
As growth becomes increasingly driven by higher-value digital offerings, it expects to see a sustainable 73% market share while unlocking new monetisation avenues in the thin-file segment.
Consequently, the management is expecting a double-digit top-line growth in FY26. However, HLIB Research noted that the group’s near-term earnings visibility remains constrained by structural headwinds.
The expiry of pioneer tax incentives in November 2026 is expected to raise its effective tax rate, while an elevated cost-to-income ratio of 46% in FY25 reflects the impact of front-loaded spending.
It has upgraded the stock from a “hold” to a “buy”. It has an 89-sen target price on the stock. Shares of CTOS were trading at 68 sen at the time of writing.
