“Despite share price undergoing a steep 14% correction yesterday, we believe regulatory risks to its business at this juncture are contained.

“As such, we upgrade CTOS to a ‘buy’,” said the investment bank in a statement.

As at 10.16 am, CTOS was among the most active counters, declining 1 sen to RM1.24 with 21.63 million shares changing hands.

Yesterday, CTOS said its subsidiary, CTOS Data Systems Sdn Bhd, has filed an appeal against the High Court’s ruling which ordered the company to pay RM200,000 to a resort director due to an inaccurate credit rating.

The company’s lawyer Ashok Kandiah, when contacted by Bernama yesterday, said that the appeal was submitted on March 8, one day following Judge Akhtar Tahir’s decision.

In a separate note, Hong Leong Investment Bank (HLIB) estimated the potential impact on CTOS’ bottom line is -30% if the credit scoring business is stopped.

“We gathered there were no court injunctions, stopping CTOS from continuing to offer credit scores to clients and there are no legal repercussions from doing so. For now, no change to our forecast.

“Considering that the share price is already down more than 10%, we believe the risk-reward now is skewed to the upside,” it said.

Meanwhile, RHB Research said that the direct-to-consumer segment, which accounts for about 9% of group revenue, may see slower growth due to the negative publicity and implications of this case.

“We were made to understand that the court’s ruling in favour of the plaintiff was based on a defamation claim, rather than on the legality of providing value-added services such as credit scoring.

“Although highly unlikely, we may cut financial year 2024 forecast earnings by about 26% under the worst-case scenario that credit rating agencies are not being allowed to formulate and sell proprietary credit scoring-related products/services,” it said.

As at 2.54pm, CTOS’s share price was up by 2 sen or 1.60% at RM1.27, giving it a market capitalisation of RM2.93 billion.