Maybank IB Research said the company’s regional acquisitions of ACS firms are likely to be long-run value accretive.
PETALING JAYA: CTOS Digital Bhd
’s latest acquisitions is a shot in the arm for the credit reporting company to strengthen its position in the regional alternative credit scoring (ACS) space.
Maybank Investment Bank (Maybank IB) Research said based on CTOS Digital’s recent briefing, it is positive on the company’s regional acquisitions of ACS firms, and acquisitions are likely to be long-run value accretive.
The acquisitions of PT Prime Analytics Indonesia and Philippine-based financial technology startup Finscore utilise telecommunication data to determine customer creditworthiness in largely underbanked Indonesia and the Philippines respectively.
Crucially, both countries possess high mobile penetration rates (Indonesia at 133% and Philippines at 140%) making telco data a viable ACS medium.
“Theoretically, telco payment history has strong predictive power relative to other ACS mediums and is also ahead of rental and utilities in terms of ease in securing data.
“It also offers lenders the opportunity to leverage behavioural data points (call and text records, app top-ups, data usage, etc.) to verify customer identity and complement payment history records under the standard underwriting model adopted by traditional banks.”
Finscore is the leading ACS provider in the Philippines that has assisted its active clientele of around 30 plus digital banks and fintechs in over 10 million loan applications and the disbursement of US$1bil since its inception in 2019.
Prime Analytics is Indonesia’s fastest growing telco scoring provider and has four current fintech clients with a telco partner market coverage of around 50%.
Separately, CTOS Digital’s strategic distribution partnership with Fico in Thailand could also open up various future cross-sell opportunities, Maybank IB Research noted.
Fico is the de-facto credit scoring standard in the United States and is currently utilised by CTOS Digital to generate its own credit scores domestically for direct-to-consumer (D2C) and enterprise customers.
Maybank IB Research said: “ We currently impute no earnings uplift from this partnership but raise our financial year 2024 (FY24) and FY25 forecasts by a conservative 6% and 8% to account for earnings accretion post-acquisitions.“
CTOS Digital is the market leading credit reporting agency in Malaysia with a 71.2% revenue market share in 2020.
The company caters to three types of customers: key accounts, commercial and D2C. The growth in number of accounts is the highest for D2C at 20% to 30% per annum, followed by commercial at 15%-20% per annum.
