KUALA LUMPUR: CTOS Digital Bhd, en route to list on the Main Market on July 19, is expected to raise RM1.2bil at the offer price of RM1.10 per share.

       CTOS Digital is the holding company of CTOS Data Systems Sdn Bhd and has an associate 20% stake in Business Online Public Co Ltd (BOL) in Thailand – making the group Asean’s leading credit reporting bureau.

       Proceeds from its public issue of RM220mil would be set aside to repay bank borrowings (RM155.18mil or 70.5%), defray fees and initial public offering (IPO) expenses (RM6.1mil or 2.8%), and the balance RM58.7mil or 26.7% for acquisitions to be identified within 36 months after listing.

       “We have identified some targets, but it’s still early stage. They are both local and offshore. We already have an investment in BOL Thailand, so if we get the opportunity to expand that investment, then I would do that.

       “There are others domestically that we’re looking at – they are very synergistic to what we do. They would add value to our business and customers, ” said group CEO Dennis Martin after the online launch of the company’s prospectus.

       The IPO entails the public issue of 200 million new shares and an offer-for-sale allocation of 900 million existing shares, representing 50% of the enlarged issued share capital.

       Upon listing, based on the offer price, the total market capitalisation of CTOS would be RM2.4bil.

       Based on its prospectus, for its financial year ended Dec 31, 2020 (FY20), the group’s earnings per share (EPS) was 1.78 sen after taking into account its profit after tax and minority interests (Patami) of RM39.2mil, which translates into a price-to-earnings multiple of 61.8 times based on the enlarged issued share capital of 2.2 billion shares upon listing.

       Regarding its dividend policy, the group targets a payout ratio of 60% of Patami.

       It is Malaysia’s largest IPO in 2021, and has attracted the largest number of institutional investors.

       A total of 23 cornerstone investors participated in IPO, including the Employees Provident Fund board, Permodalan Nasional Bhd, Aberdeen Standard Investment, AIA, Eastspring Investments, FIL Investment Management and JP Morgan Asset Management.

       “CTOS Digital’s growth story, combined with an innovative, comprehensive product offering has proven to be a compelling one.

       “CTOS Digital’s 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, ” said Martin.

       CTOS Digital Group provides digital solutions across three customer segments – the key account segment, which includes leading financial institutions and corporates; the commercial segment, which includes small-and-medium enterprises (SMEs) as well as over 1.3 million individual customers.

       For FY18 to FY20, the group posted a 12.8% CAGR (compound annual growth rate) in revenue from RM110.5mil to RM140.5mil, while its Patami recorded quicker CAGR of 22.2%, jumping from RM30.5mil to RM45.5mil.

       For its first quarter ended March 31, 2021 (Q1FY21), CTOS Digital recorded a 24.1% year-on-year jump in revenue to RM42.3mil, while Patami for the quarter grew 73% to RM16.4mil.

       “We registered all-round growth across core customer segments, a clear indicator of our increasingly critical function as a digital solutions provider and partner to both businesses and individuals. We are buoyant about our future prospects as we retain our growth thrust, ” said Martin.

       Going forward, the group aims to allocate 65% of capital expenditure (capex) to invest in information technology capabilities, and data and analysis within the next two years, as well as to increase investment in artificial intelligence and machine learning for the medium to long-term.

       As part of its growth strategies within Malaysia and Asean, it also aims to further develop and extend ecosystem of end-to-end credit management solutions.

       “Over the last few years, we spend about RM7mil to RM8mil on average in capex and I would anticipate that trend will continue going forward. In 2021, the capex could be higher because of the developments we are looking at, ” said Martin.

       Meanwhile, independent market research by IDC Malaysia reported that the Asean region had a cumulative credit reporting market size of RM990.5mil in 2020, which is expected to grow at a CAGR of 10.8% between 2021 to 2025, relatively higher than the forecasted 7.5% and 5.3% CAGR in the United States and United Kingdom respectively.

       Malaysia’s credit reporting market size is slated to expand at a CAGR of 13.2%, a much faster pace compared with the Asean, US and UK markets.

       On the distribution of the 200 million new shares, 44 million are for application by the Malaysian public via balloting; 120 million for the group’s eligible directors, employees and persons who have contributed to its success, while the remaining 36 million will be offered to Malaysian and foreign institutional investors.

       The 900 million offer-for-sale allocations are for Malaysian and foreign institutional investors via a private placement exercise.

       Meanwhile, proceeds from the offer-for-sale of RM990mil will accrue entirely to the selling shareholders who are private equity fund Creador Group, and CTOS’ co-founders and brothers Chung Tze Keong and Tze Wen, as well as Ng Gaik Lin.

       The group’s shareholders are Creador (80%), Tze Keong (9%) and Tze Wen (9%) and Ng (2%).

       Applications for CTOS Digital’s IPO opened yesterday and will close on July 6.