CTOS Digital debuts on Bursa Malaysia

The year’s largest IPO of RM1.2b would accelerate the company’s growth trajectory in the era of a Covid-19 world


CTOS Digital Bhd is going public today to raise RM1.2 billion in the largest IPO in Malaysia this year.

The credit reporting agency’s listing entails a public issue of 200 million new shares and an offer-for-sale of 900 million existing shares, priced at RM1.10, valuing the company at RM2.4 billion.

CTOS Digital group CEO Dennis Martin said the IPO would accelerate the company’s growth trajectory in the era of a Covid-19 world.

According to Martin, the company is looking to add value within the Malaysian market and the region

“We are a company that provides services that are required during the lockdown as a digital organisation.

“A big chunk of our revenue is recurring. So, we have had a lot less of an impact on our business than you would have expected in other organisations. We have a very quick V-shaped recovery because of pent-up demand in our solutions,” Martin told Bloomberg Markets in an interview last Friday.

He said the company is looking to add value within the Malaysian market and the region, including via merger and acquisition deals.

“We are currently pretty early in the discussions and are looking at all different types of investments, whether a majority or a minority stake,” he said.

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

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

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).

Analysts have backed the CTOS Digital IPO underlined by the company’s dominant position in the industry under the current digital era and its higher growth potential than other established players in advanced countries.

Public Investment Bank Bhd and JF Apex Securities Bhd have derived a fair value of RM1.16 to RM1.25 respectively, a premium to the RM1.10 offer price in line with the group’s market-leading industry position.

CTOS Digital has registered a net profit of RM11.84 million for its second quarter ended June 30, 2021 (2Q21), up 57.9% from RM7.5 million last year.

2Q21 revenue grew 24.5% to RM37.85 million from RM30.65 million in the same period in 2020, driven by strong growth in new CTOS Credit Manager subscribers and strong demand for CTOS Data Systems Reports and digital solutions.

This was despite the implementation of continuous Movement Control Orders (MCOs), the company said in an exchange filing last week.

Year-to-date, the group’s net profit and revenue stood at RM19.53 million and RM75.8 million respectively, compared to RM15.62 million and RM64.73 million for the six months in 2020.

The group has seen a decline in small and medium enterprises activations as business premises are closed in MCO 3.0.

However, it said the high recurring revenue nature of the business and the accelerated rollout of the digital and analytical solutions would compensate for the slow down.