Kenanga Investment Bank Bhd maintains an “outperform” call with a target price (TP) of RM1.80, while RHB Investment Bank Bhd maintains its “buy” call with a TP of RM1.92.
CTOS saw its net profit rise 32.9% to RM16.58 million for the first quarter ended March 31, 2023 (Q1FY23), from RM12.48 million a year earlier.
Earnings per share also rose 16.7% to 0.7 sen from 0.6 sen in the same quarter last year.
The group declared a first interim dividend of 0.433 sen per share, totalling RM10 million, an increase of 33% from a year earlier and representing a payout ratio of 60.3%.
“Q1FY23 broadly met expectations, as normalised net profit of RM20.8 million made up 20% of our full-year forecast and 21% of consensus full-year estimate,” said Kenanga.
Segment-wise, key customer accounts demonstrated the highest overall growth (67%) followed by commercial accounts (19%) as more digital reports were churned.
CTOS’ international operations continued its strong trajectory with 41.8% and 51.1% growth in revenue and profit, thanks to higher bulk data sales.
Kenanga noted that operating margins continued to expand as the higher volumes likely generated better economies of scale.
“On a quarterly basis, it is noted that the period under review marked the highest-ever reported revenue for the group,” it said.
Blue skies ahead?
Both investment banks expect CTOS to continue reaping benefits from growing demand for data and analytics, expedited by the increasing digitisation of business operations.
“More synergistic and cross-selling opportunities are seen from various product expansions such as its digital lending solutions platform, ESG ratings and SME credit ratings,” said RHB.
CTOS remains their top pick for the sector, owing to its high margins, solid cash flow generation and strong return on equity.
The group is a market leader in credit reporting, with an estimated 77% domestic market share.
“We believe the stability of demand for CTOS’ various solutions will continue to bode well in the current uncertain environment, especially in the technology sector, where most semiconductor-related names are in a down-cycle,” it said.
Key risks to CTOS’ prospects are changes in the regulatory environment, slower-than-expected top line growth, and data security breaches.
At noon, CTOS’ share price was flat at RM1.31, giving it a market capitalisation of RM3.03 billion.