PETALING JAYA: A potential 20% to 30% growth in the next two years can be expected from CTOS Digital Bhd.

       This comes after it recently announced two proposed acquisitions that would allow the company to integrate its data and analytics solutions with the software and platform thereby giving it an opportunity to develop new propositions in the economic environment.

       It plans to buy a 49% stake in fintech company Juris Technologies Sdn Bhd for RM205mil, increase its stake in Business Online Public Company Ltd to 22.65% and undertake a private placement to raise RM240.7mil.

       Kenanga Research said it was excited about the potential 20%-30% growth trajectory in the next two years.

       It said the acquisition of Juris would enable the group to accelerate its growth plans. It allows it to move up the value chain in building an end-to-end digital lending solution from loan origination and management to collections.

       It also allows it to leverage Juris’ strength in its enterprise software and platform capabilities and offer it to existing clients.

       CTOS will also be able to tap into Juris’ sales team and existing client relationships.

       The immediate potential synergies are digital solutions to lenders, analytics solutions with machine learning and artificial intelligence capabilities to financial institutions, Kenanga said.

       It will also have small and medium enterprise collections as an add-on module and lead-gen solutions to execute and support in converting leads to sales.

       The acquisition is expected to be completed in the first quarter of financial year 2022 (Q1’FY22) and the private placement is expected to conclude within the next two weeks.

       HLIB Research said it was positive as the developments would enhance CTOS’ FY22 net profit by about RM9.5mil.

       Juris has a strong entrenched market position in Malaysia and overseas presence in four countries, namely Singapore, Brunei, Australia and the UAE.

       Its client portfolio consists of more than 50 reputable corporations and 3,000 agencies consisting of leading financial institutions, banks, development funds and multinational corporations.

       HLIB said Juris’ business is also highly cash-generative in nature with about 65% of its total revenue stream being recurring.

       HLIB did not make any changes to its earnings forecasts.

       It maintains its “buy’’ call with a target price of RM2.45.

       Kenanga cut its FY21 earnings forecast for CTOS by 12% but raised FY22 and FY23 earnings estimates by 3% and 1% after factoring in higher tax rates, pending approval of pioneer status incentives’ extension, and incorporating the impact of proposed acquisitions and fund raising into its model.

       It lowered its target price to RM2.40 a share and maintains a “buy” call.