CTOS 3-year plan, Juris deal positive to outlook

The credit reporting agency aims to capture opportunities in the digital economy via the plan 


RHB Retail Research maintained a ‘Buy’ call on CTOS Digital Bhd after the company introduced its three-year strategic roadmap, potential synergies and target market following its proposed acquisition of Juris Technologies Group. 

“In short, we are excited about the potential 20%-30% growth trajectory in the next two years, and the prospects of integrating its data and analytics solutions with the software and platform, to develop a new proposition in the new economy,” RHB analyst Lee Meng Horng wrote on CTOS’ roadmap in a report yesterday. 

CTOS has identified three main strategies in its three-year strategic vision to capture opportunities in the digital economy. 

It will continue to build on its data analytics, fraud and identity, and platform capabilities to solidify its leadership position, Lee noted. 

CTOS aims to broaden and deepen its data assets into a single big data platform and move up the value chain to improve synergies and provide deep insights to clients. 

“It will also provide an enhanced suite of solutions to existing and emerging verticals in digital transformation, platform, data consolidation and sharing, workflow automation, datadriven analytics, and insightsrelated solutions,” he said. 

Lee opined the acquisition of Juris will enable the group to accelerate its growth plan and move up the value chain in building an endto-end digital lending solution, from loan origination and management to collections. 

“Aside from leveraging Juris’ strength in its enterprise software and platform capabilities, and offering it to existing clients, CTOS will also be able to tap into Juris’ sales team and existing client relationships,” he added. 

The immediate potential synergies are namely the digital solutions to lenders, analytics solutions with machine learning and artificial intelligence capabilities to financial institutions, small and medium enterprises collections as an add-on module, and lead-gen solutions to execute and support in converting leads to sales. 

Lee expects the Juris acquisition to be approved during an EGM on Feb 7. 

“The acquisition price of RM205.8 million implies 23 times on the financial year of 2021 (FY21F) profit after tax of RM18.1 million, valuing Juris at RM420 million,” he said. 

CTOS is looking to embark on a capital fundraising of up to RM270 million to fund the acquisition and increase its stakes in business online and RAM Holdings Bhd for RM35 million and RM29 million respectively. 

“We cut FY21 earnings by 12% but raised FY22F, FY23F earnings by 3% and 1%, respectively, after factoring in higher tax rates, pending approval of pioneer status incentives’ extension, and incorporating the impact of proposed acquisitions and fundraising into our model,” he further said. 

As the acquisitions are associate companies, RHB lowered its discounted cashflow-derived target price for CTOS to RM2.40 as it rolls forward its valuation base year and takes into account the dilution impact from fundraising. 

CTOS shares rose one sen to RM1.87, giving it a market capitalisation of RM4.09 billion.