Kenanga Research has reiterated an “Outperform” recommendation on CTOS Digital Bhd with a TP of RM2.00.
It said that although the earnings accretion is diluted by the placement, Kenanga was positive on the deals, especially on the JurisTech acquisition, as it allows CTOS to provide an end-to-end digital lending service. “We maintain our fully diluted TP of RM2.00 on 55x FY22E PER, as EPS enhancement is insignificant in FY22.”
It said that the acquisitions would increase CTOS’ profits from associates, lifting FY22E CNP by 7%. However, the 6.2% earnings dilution from an enlarged share base would weigh in and only enhance FY22E EPS by ~1%,
Last Friday, CTOS Digital Bhd announced that it is acquiring a 49 per cent stake in fintech specialist Juris Technologies Sdn Bhd (JurisTech) for RM205.8 million cash.
Kenanga said that the acquisition complements CTOS’ existing services of providing credit information and analysis to customers and secondly, by combining JurisTech’s software and CTOS’ expansive database, the duo can jointly develop new digital lending solutions that include credit data, software, and analytics services.
It said that such services are popular given; banks’ increased digital transformation and enhancement requirements (e.g. e-KYC), and growing demand for data analytics solutions. Thirdly, CTOS and JurisTech can cross-sell to each other’s customers.
