Robust growth forecast for CTOS Digital

PETALING JAYA: CTOS Digital Bhd will continue to see a strong growth trajectory as it ramps up all three of its business segments, coupled with better associate contribution.

In the second quarter ended June 30, 2023 (2Q23), the credit reporting company recorded a 17% year-on-year (y-o-y) rise in net profit to RM25.5mil, bringing the six-month profitability to RM37.71mil.

Notably, revenue for 2Q23 was a new record at RM62.2mil, an increase of about one-third from the same period a year ago. Its results came within expectations of analysts.

UOB Kay Hian Research (UOBKH) said CTOS is poised to record a stellar three-year net profit compound annual growth rate of 19% in 2023-2025. It noted the group has a differentiated product suite and innovation which will deepen its share of wallets in the credit bureau industry.

CTOS is also undertaking vertical expansion and broadening of data assets in other economy sectors, and is expected to reap synergies and incremental revenue from newly-acquired associates, namely Business Online plc, Juristech and Basis.

Apart from these, the group has meaningful credit growth, which will spur demand for credit and risk information solutions, and has a distinctive advantage when combining traditional datasets with advanced analytics, said the research house.

On its strategic acquisitions in recent years, UOBKH said they have proven fruitful as CTOS’ share of associate profit soared 17.9% y-o-y and 205% quarter-on-quarter to RM6.8mil in 2Q23.

However, UOBKH said the positives have been fairly priced in the current share price and valuations. As such, the research firm maintains a “hold” call on the stock with a RM1.50 a share target price.

On the other end, research firms like RHB Research and Kenanga Research are keeping their “buy” and “outperform” calls, respectively, on the stock. RHB Research anticipates another record high in earnings for CTOS, which it said demonstrates its recession-proof business model.