Following a retracement of 16% from a recent high of RM1.51 to as low as RM1.27, CTOS’ share price subsequently moved up to close at RM1.34, Kenanga is on the opinion a technical rebound could be on the cards in view of some bullish indicators.
Based on the technical chart the appearance of an upward parabolic SAR trend, the existence of a bullish stochastic divergence pattern (with the %K line forming three rising bottoms while the share price drifting lower), and the MACD is on the verge of crossing above the signal line.
An extension of the positive momentum will likely lift the stock toward our resistance thresholds of RM1.52 and RM1.62, which represents upside potentials of 13% and 21%, respectively. Conversely, the stop loss level is set at RM1.16 (a 13% downside risk).
CTOS is Malaysia’s leading credit reporting agency, providing credit information and analytics digital services and solutions
that are widely used by banking & financial institutions, insurance and telecommunication companies, large corporations,
small and medium enterprises, and consumers for self-check. Earnings-wise, the group posted a strong net profit of RM22.5m in 2QFY22 (+80% QoQ), which brought its bottomline to RM35m (+73% YoY) in 1HFY22.
Going forward, the consensus is expecting CTOS to report a net profit of RM78.9m in FY December 2022 before growing further to RM97.1m in FY December 2023. This translates to forward PERs of 39.2x and 31.9x, respectively. In terms of recent corporate news, it announced last week its plan to collaborate with Otofacts to provide background screening services to buyers of used vehicles.
