In a note today, the bank said the offer would be debt-funded and likely to be earnings accretive, given the attractive acquisition a multiple of less than 20 times.

“Furthermore, there are synergies to be realised through cross-selling and leveraging on each other’s expertise to further tap into the small and medium enterprises (SME) segment,” it said.

Maybank IB said the strategic acquisition would assist RAM expand its credit rating business into the underpenetrated SME segment, as RAM could leverage on CTOS’ credit assessment, access to quality information, analytics, and go-to market expertise within the segment.

“On the other side, SMEs will gain better access to competitive credit facilities, while investors will be able to tap into attractive high yield debt instruments in the debt capital market,” it said.

As such, the bank has maintained a ‘buy’ rating on CTOS but trimmed its target price to RM1.86 based on lower regional median price to earnings of 2.0 times.

RHB Investment Bank stands neutral on the proposed deal after considering the weaker outlook of RAM’s core business in today’s operating environment, steep valuation, long gestation period, and risk to marketability.

“To put into perspective, the size of this potential acquisition is only up to 20% of CTOS’s total assets. On a proforma basis, it could potentially contribute an additional 5 to 7% to its financial year 2023 profit, while gearing could rise to 35% from the current 14%,” it said.

On April 25, CTOS entered into a share purchase agreement with OCBC Bank (Malaysia) Bhd, Affin Bank and Affin Hwang Investment Bank to acquire 910,000 ordinary shares in RAM for RM25.06 million.

CTOS also said that it would be making a general offer to all the remaining shareholders.

At 10.50 am, CTOS shares rose one sen to RM1.22, with 1.1 million shares changing hands.