RHB Research said CTOS’ management remained confident of the company’s growth trajectory.
PETALING JAYA: Analysts have reacted positively to credit-reporting outfit CTOS Digital Bhd
’s move to remain focused on growing the commercial segment of its credit-reporting business.
Research houses have either upgraded their ratings on the company or maintained them as it addresses the slower pickup in sales and the lower frequencies of credit reviews.
UOB Kay Hian Research (UOBKH) Research has upgraded its call to a “buy” with a higher target price of RM1.51 from RM1.36 despite downgrading earnings by 15% primarily to account for a longer sales cycle in the key-account segment and a slower ramp-up in newly secured commercial contracts.
According to UOBKH Research, CTOS’ management has revised downwards its internal earnings target for 2025 to between RM125mil and RM130mil from between RM150mil and RM160mil previously.
The company said revenue grew by 20% year-on-year when it announced its results for the third quarter ended Sept 30, 2024 (3Q24) on Monday.
It also declared a third single-tier interim dividend of 0.84 sen per share to be paid on Jan 17, 2025.
“Following the company’s recent share price retracement, we believe that the headwinds it faces have largely been priced in and we now view the risk-reward profile as being favourable at this stage.
“We still reckon that CTOS is well-positioned to be the direct proxy to growing demand for Malaysia’s credit-reporting industry,” UOBKH Research said.
CIMB Research, which upgraded the stock to a “buy” from a “hold” with a higher target price of RM1.80 from RM1.50, noted that the company sees greatest opportunity in the commercial segment with a total addressable market (TAM) of RM1.2bil, driven by anticipated gains from 350,000 small and medium enterprises (SMEs) in the country.
The company forecasts TAM of RM2.1bil for its Malaysian operations and RM600mil for international operations.
The research house added that the company saw an encouraging increase in commercial-customer activations in 3Q24 spurred by improving sentiment among SMEs and rising consumer spending.
“The commercial business entered 3Q24 with strong momentum, overcoming challenges that SMEs faced in the first-half due to regulatory changes and subdued market conditions,” the research house said.
Kenanga Research maintained an “outperform” call but cut its target price to RM1.70 from RM2 to reflect revised lower revenue and profit trajectories for the company.
However, it said that CTOS is looking to ramp up its commercial segment as credit-reporting activations in the segment would be tied to growing business activity in the retail, manufacturing and service industries.
RHB Research, which maintained a “buy” call on the company while cutting its target price to RM1.58 from RM1.73, said CTOS’ management remained confident of the company’s growth trajectory.
This is despite a longer sales cycle and conversions, with a robust pipeline across key accounts and its commercial segment as activations and consumption continues to grow with the spread of digitalisation and regulation-driven needs.
