DESPITE having just embarked on some significant mergers and acquisitions (M&As), CTOS Digital Bhd is still in an acquisitory mood and is eyeing a more significant stake in companies to create additional value.

       More than three months ago, Malaysia’s largest credit reporting agency had upped its stake in the bond rating agency RAM Holdings Bhd by an additional 3.5%, bringing its total shareholding to 8.1%.

       Then last month, CTOS made its largest ever acquisition since its inception, buying a 49% stake in the banking software specialist Juris Technologies Sdn Bhd (JurisTech) for more than RM200mil.

       In the same month, it also raised its stake in the largest company information bureau in Thailand, Business Online Public Company Ltd (BOL) to 24.83% from 22.65% previously.

       To strengthen its presence in Thailand, the leading regional credit bureau has been gradually increasing its stake in BOL. In August last year, CTOS raised its stake in the Thailand-based company to 22.65% from 20% previously.

       Given the aggressive acquisitions the company has embarked on, it appears that it is not resting on its laurels.

       It is noteworthy that the company was sitting on RM43mil net cash, with zero debt as at the end of the financial year ended Dec 31, 2021 (FY21).

       This shows that the company has the flexibility to fund its acquisitions.

       So, which companies is CTOS eyeing to up its stake?

       According to its newly appointed deputy group chief executive officer Eric Hamburger, the credit reporting company is looking to raising its stake in RAM Holdings as well as JurisTech, which would allow the group to collaborate in a more “meaningful way”.

       “If we’re able to have a more significant stake in them, we can continue to collaborate in a more meaningful way.

       “We own an 8.1% stake in RAM. So, it’s important but not as relevant as for example BOL, where we have a deeper level of relationship with them.

       “For JurisTech, we also hope to increase the stake. It’s the beginning of a journey.

       “We’re always open to acquisitions, anything that can help accelerate our growth both in capabilities as well as raw assets but also internationally,” he tells StarBizWeek.

       However, Hamburger points out that there are limitations in terms of how much can be acquired in these companies as it continues its negotiations them.

       “That’s a journey still moving forward as we negotiate the possibility of increasing our stake.

       “That’s going to take some more time,” he says.

       He explains that CTOS would likely be using internal funds to raise its stakes, as the company has “sufficient” leverage to be able to do so.

       CTOS has funded its recent stake buys in BOL and JurisTech largely through new share issuances.

       Certainly, acquisitions come with the risk of whether the target companies meet the expected performance.

       Hamburger says that the recent acquisitions would lead to immediate contributions to CTOS’ bottom line.

       “It’s a collaboration for new business. They have their product portfolio, we have our product portfolio. We put together the teams to identify quick wins by generating more sophisticated solutions for customers.

       “So, it’s not that typical acquisition where you have to combine teams, and do migration of systems, etc. It’s more of how we build a solution for our customers together,” he explains.

       No doubt, CTOS has been reporting decent earnings growth.

       For FY21, the credit reporting provider’s net profit improved 9.7% to RM42.98mil from a year ago.

       Its revenue also increased 15% year-on-year to RM153.17mil, driven by healthy growth from all key segments across its divisions.

       Hamburger projects a 15% to 20% compounded annual growth rate for both its topline and bottom line for the next two years supported by growing customers and expansion of services.

       He also shed light on an upcoming service CTOS is looking to provide its customers – the multiple face ID recognition.

       This would allow for facial recognition to not only check an applicant’s features against their identity documents, but also against an ever growing database of faces for further confirmations, or possible deviations, thereby further strengthening the CTOS eKYC solution, he says

       Hamburger hopes for this upcoming service to be launched before the second half of the year.

       Last year, CTOS launched its product named “fraud bureau CTOS ID-Guard” with local leading banks which has prevented fraud losses of up to RM149mil to-date.

       In terms of dividends, Hamburger says the company’s policy is to pay out at least 60% of its normalised profit after tax and minority interests or Patami.

       For the next two years, Hamburger is optimistic about the company’s outlook as domestic business sentiment is positive on the economic reopening.

       Citing RAM Holdings and CTOS Data Systems Sdn Bhd’s joint Business Confidence Index (BCI) survey for the first quarter (Q1) of 2022, Hamburger says the SME subscribers for CTOS credit manager pulled 17% more business credit reports since the start of this year from a year ago to carry out due diligence on new customers and re-evaluate existing customers.

       “I think that for the next two years the economy is going to be in good shape,” he says.

       At at March 2022, in the consumer segment, CTOS had a total of 1.9 million customers, while for the SME segment, it had a total of 17,000 clients.

       CTOS’ products and services are also widely used by domestic banks, insurance and telecommunication companies, large corporations, small and medium-sized enterprises, legal firms and statutory bodies.

       The group’s primary business includes providing credit information, analytics and digital solutions on companies, businesses as well as consumers at various stages of their lifecycle.

       As such, Hamburger discloses that the company is poised to take the industry to an international level, aiming to have a broader portfolio and especially through analytics.

       “I think we have a lot of space still to grow there and we’re doing it internally, but these acquisitions accelerate that so being able to leverage the software like JurisTech has, it’s something that has already happened in the US and UK with the credit bureaus.

       “We’re bringing it to Malaysia and South-East Asia.

       “I think there is tremendous opportunity for that type of expansion,” he says.

       Hamburger, who joined the company in September last year, hails from Experian Colombia and Mexico, having spent many years in the credit reporting industry. He says CTOS was an opportunity for him to develop the industry in Malaysia as over 50% of the population don’t have a credit history or credit information.

       “The possibility of joining a company that’s in growth mode in an economy that is in a growth mode and for me, the possibility of helping out was exciting. Plus, I heard great news about Malaysia, great adventure for me to join,” he adds.

       Hamburger also reiterated that CTOS is one of the few companies on Bursa Malaysia to strive to be the first to report its quarterly numbers and also provide detailed guidance on its earnings projections via in-depth presentations available on its website.