by AZALEA AZUAR & NUR HANANI AZMAN / pic credit: ctosdigital.com

CTOS Digital Bhd aims to raise RM1.2 billion from its upcoming listing on the Main Market of Bursa Malaysia Securities Bhd at an offer price of RM1.10 per share.

The IPO entails the public issue of 200 million new shares and an offer-for-sale of 900 million existing shares, priced at RM1.10, giving the company RM2.4 billion of a market capitalisation.

The listing exercise has garnered participation of 23 cornerstone investors, including foreign parties — dubbed the largest institutional participation in Malaysian IPO.

“CTOS Digital product offerings have expanded beyond credit reporting instruments to include a breadth of digital solutions to support every stage of the customer lifecycle.

“All of this comes on the back of steady financial growth, making us the leading credit reporting agency in Malaysia,” CTOS Digital group CEO Dennis Martin said at the company’s prospectus launch yesterday.

Among the major investors included the Employees Provident Fund Board, Permodalan Nasional Bhd, Aberdeen Standard Investment Ltd, AIA Group Ltd, Eastspring Investments Bhd, FIL Investment Management and JP Morgan Asset Management.

Of the 200 million new shares, 44 million units will be available for Malaysian public via balloting, 120 million is for application by CTOS Digital’s eligible directors, employees and persons who have contributed to its success.

Another 36 million shares will be offered to Malaysian and foreign institutional investors.

The 900 million shares on offer-for-sale will be opened to both Malaysian and foreign institutional investors through a private placement exercise.

Institutional offering will be closed on July 6, 2021, and the company go public on July 19, 2021.

CTOS Digital plans to use RM155.2 million of the IPO proceeds for debt repayments, synergistic investment and acquisition of target companies (RM59 million) and defray listing fees and expenses (RM6.1 million).

“We put aside a little over RM56 million for future acquisitions. We have identified some targets, but it’s still early stage. They are both local and offshore,” Martin said.

CTOS Digital’s revenue grew 24.1% higher to RM42.3 million in the first quarter ended March 31, 2021 (1Q21), compared to RM34.1 million in 1Q20.

The group’s normalised profit after tax and minority interests (PATAMI) increased by 73% to RM16.4 million in 1Q21 from RM9.5 million previously.

The 1Q21 performance outpaced the growth from the financial years ended Dec 31, 2018, to 2020 (FY18 to FY20) which had a 12.8% compound annual growth rate (CAGR) in revenue, from RM110.5 million to RM140.5 million.

Normalised PATAMI recorded a 22.2% CAGR from RM30.5 million to RM45.5 million from FY18 to FY20.

CTOS Digital is fixing a 60% dividend policy of PATAMI to reward their shareholders.

IDC Malaysia reported that Asean carried a cumulative credit reporting market size of RM990.5 million last year and it is projected to grow at a CAGR of 10.8% between 2021 to 2025.

Asean is expected to outpace the UK and US, which is forecasted to record 5.3% and 7.5% of CAGR, respectively.

Malaysia’s credit reporting market size is expected to expand faster than the Asean, UK and US at a 13.2% CAGR.

“To cater to the robust environment in Malaysia, we have steadily introduced new products each year, including CTOS e-Know Your Customer, CTOS Consumer and SME (small and medium enterprise) Score, CTOS ID-Guard, the Malaysian banking industry’s first fraud bureau, and many more.

“This is in line with our plan to introduce more digital solutions to construct a dynamic, stable and agile financial ecosystem in Malaysia,” Martin said.

“Retail investors are comparing the IPO with MR DIY Group (M) Bhd, which is also backed by Creador.

“When MR DIY’s IPO was launched, there were concerns about it’s valuations. CTOS Digital wouldn’t be cheap either,” Rakuten Trade Sdn Bhd head of equity sales Vincent Lau told The Malaysian Reserve recently.

Creador has been a major shareholder of CTOS since 2014.

The private equity firm has invested in consumer-centric brands such as Old Town White Coffee and Tealive milk tea.

Malacca Securities Sdn Bhd head of research Loui Low said investors are attracted to CTOS Digital, inspired by MR DIY’s success.

He said the IPO market could be slightly neutral at this juncture as investors await clarity in the markets and economic environment.