KUALA LUMPUR: CTOS Digital Bhd's earnings growth is well on track with its additional stake purchase in Business Online PCL as it rolls out plans to tap into high-growth sectors.

       CTOS recently announced it had acquired an additional 2.65% or 21.74 million shares in Business Online for RM26.8mil, which brings its total stake in the company to 22.65%.

       According to Kenanga, the timing of the acquisition was a positive surprise as CTOS had just completed its 4.625% acquisition in RAM Holdings on July 29 this year.

       "The faster-than-expected acquisitions, coupled with plans to tap into new sectors with tremendous growth potential such as automotive, insurance and real estate (combined 2021-25 CAGR of 50.6%) have boosted our confidence in CTOS’ earnings growth in the coming years.

       "Post-BOL acquisition, we estimate CTOS’ cash balances at ~RM35m with RM21.8m IPO proceeds earmarked for strategic investments," it said.

       The research house said the acquisition price translates to FY20 price-earnings ratio (PER) of about 44x, which is in line with global peers' PER of about 40x.

       "The increased stake in the Thai leading credit bureau BOL ( about 59% market share) allows CTOS to further tap into an underpenetrated Thailand (about 57% penetration versus developed US and UK’s 100%)," said Kenanga.

       It added that Business Online's 1HFY21 earnings are about 30% higher year-on-year.

       Kenanga reiterated "outperform" with a higher target price of RM1.75 from RM1.40 previously, based on higher FY22 price-ernings ratio of 55x from 45x previously.