PETALING JAYA: CTOS Digital Bhd
is expected to report weaker earnings in the fourth quarter of 2026 (4Q26), as the temporary suspension of selected credit reporting services following a cybersecurity incident in late September and the expiry of its tax incentive weigh on profitability.
CIMB Research said the disruption, which affects about 35% of the group’s revenue, could result in lost earnings and additional remediation costs, while transaction volumes may take 30 days to 60 days to recover fully after services resume.
“Earnings pressure will be compounded by the expiry of CTOS’ tax incentive on Nov 8, 2026, after which its taxable income will be subject to the statutory corporate tax rate of 24%, compared with the group’s nine-month 2026 effective tax rate of 8.4%.
“We expect these factors to weigh on 4Q26 profitability, with the full impact of the higher tax rate becoming more pronounced in the financial year 2027 (FY27),” CIMB Research said in a report.
CTOS reported a 21.6% quarter-on-quarter increase in net profit for the third quarter of FY26 (3Q26), supported by a rise in profit contribution from its Malaysian operations, driven by higher revenue and a RM2.03mil gain from the disposal of a 10% stake in its associate, Juris Technologies Sdn Bhd (JurisTech).
Following the disposal, its equity interest in JurisTech declined to 39% from 49%.
CIMB Research said it has maintained its “hold” recommendation on the stock with a target price (TP) of RM0.55, pending the group’s analyst briefing, which it expects to provide greater clarity on the restoration of affected services and the pace of recovery in transaction volumes.
Meanwhile, RHB Research expects a swift recovery in business once services resume, given CTOS’ leading market position and industry preference on its solutions as well as the importance of a credit reporting agency embedded within the ecosystem of its key account clients.
“We believe the new key growth strategies driven by deepening partnerships with digital products, AI solutions and alternative data solutions as well as cost discipline should underpin its growth into FY27,” RHB added.
The research firm is keeping its earnings forecasts and discounted cash flow-based TP of RM1.06, which includes a 4% ESG discount.
However, there could be downside risks to the firm’s FY26 forecasts if the suspension is prolonged into November. It kept its “buy” call on the stock.
An analyst said the group’s 3Q26 results were generally in line with expectations.
He added the company remains a leading player in Malaysia’s credit reporting industry, supported by its established market position and recurring income base, which should underpin a recovery once the affected services are restored.
Shares of CTOS traded at 42 sen apiece at last look, down 48.78% year-to-date.
