PETALING JAYA: Investor sentiment on CTOS Digital Bhd continues to improve after the credit rating agency announced several corporate exercises that could accelerate its growth.

       The counter closed three sen, or 1.7%, higher at RM1.76 yesterday, off an intraday high of RM1.79.

       Last Friday, CTOS proposed three corporate exercises – the first entails the buying of a 49% stake in Juris Technology Sdn Bhd for RM205.8mil.

       The second is the acquisition of a 2.25% stake in Business Online Public Co Ltd (BOL) to raise its stake to 24.9% for RM34.9mil. And lastly, it undertook a private placement to raise RM240.7mil.

       CTOS’ proposals, if realised, should accelerate growth via new solutions and collaborations, according to analysts.

       As up to five digital banking licences may be issued as early as in the first quarter of 2022 and with the emergence of various peer-to-peer lending and micro-lending players, CTOS’ proposals will enable it to better equip itself and put it firmly on the path of becoming a prominent service provider, they noted.

       RHB Research said there were also opportunities to cross-sell and tap into each other’s clientele regionally.

       Kenanga Research said although the earnings accretion is diluted by the placement, it was still positive on the deals, especially on the JurisTech acquisition, as this would allow CTOS to provide an end-to-end digital lending service.

       HLIB Research said it was also positive on the development, as it would enhance CTOS’ financial year 2022 (FY22) earnings per share (EPS) by about 5%, based on its estimates.

       Kenanga Research estimated that CTOS is paying about 23 times FY21 price-to-earnings ratio (PER) for JurisTech.

       It said there were no direct comparables for a fintech like JurisTech and its closest competitors are not listed.

       However, given the evident synergies and scalability of JurisTech’s software services, Kenanga reckoned the price to be fair.

       Other listed global credit bureaus (not direct comparables) trade at about 40 times FY21 PER, it added.

       HLIB Research said it liked CTOS as it believed the company is poised to ride on the bright prospects of the Asean Credit Reporting Industry.

       It noted CTOS’ position as the leading credit reporting agency in Malaysia with an estimated market share of 71.2% in 2020 and its long-term relationships with its customers, with over three decades of history with domestic banks and financial institutions, as well as the nature of its business, which has an exceedingly high barrier to entry.

       Kenanga Research added that the acquisitions would increase CTOS’ profits from its associates, lifting FY22 core net profit by 7%.

       However, the 6.2% earnings dilution from an enlarged share base would weigh in and only enhance FY22 EPS by about 1%.

       It retains its “outperform’’ call with a target price of RM2 a share.

       Both RHB Research and HLIB Research retain their “buy’’ calls with target prices of RM2.42 and RM2.45 a share, respectively.