The research house said CTOS’ first half (1H FY2024) profit after tax and minority interest (Patami) missed expectations, at only 21% of its and consensus’ full-year forecasts.
This was mainly due to lower-than-expected contributions from associates, and higher-than-expected hiring and marketing costs.
Revenue grew 21.7% year-on-year (y-o-y) to RM148.2 million, driven by growth in key accounts and contributions from new acquisitions (+40.3%), commercial (+6.1%), and direct-to-consumer (+12.7%).
RHB kept its “buy” call on CTOS but lowered its target price to RM1.73 from RM1.84.
It also cut its FY2024F-2026F earnings by 9.8%, 3.4%, and 1.8% after factoring in higher cost assumptions and slower contributions from associates.
RHB said CTOS’ management had lowered FY2024 internal profit targets to the RM110-RM115 million range, from RM125-RM130 million previously, mainly on slower-than-planned implementation of digital solutions and additional sales team hires.
However, the management maintained the FY2025 targets at the RM150-160 million range.
“Despite the unorthodox earnings miss, we believe CTOS Digital is set to continue benefitting from the secular digitalisation trend and growth in financial literacy with a recession-proof business model,” it said in a note today.
“Stronger 2H 2024 expectations are supported by robust pipeline and customer conversions, and seasonally stronger demand for reports, and portfolio analytical and digital solutions domestically and internationally.
RHB said the downside risks include regulatory environment changes, slower-than-expected topline growth, and data security breaches.
Meanwhile, AmInvestment Bank has maintained its “buy” call on CTOS and kept its TP at RM1.80 per share.
It noted that 1H FY2024 revenue rose 21.7% y-o-y mainly due to “robust growth from all business segments”.
However, first half profit share from associates fell by 8.8% mainly due to lower contribution from JurisTech, which was impacted by delayed project implementation.
It said the Court of Appeal overturning the High Court’s decision that CTOS cannot provide credit scores last month was positive for the group.
“In addition, the international business segments have begun to contribute positively towards the group’s financial performance in 2024 with CTOS set to launch its commercial international business in Singapore and capitalise on regional opportunities.
It added that CTOS also plans to concentrate on the direct-to-consumer (D2C) segment by engaging with 16 million credit-active consumers in Malaysia through various initiatives.
CTOS’ shares closed 5 sen or 3.5% lower at RM1.37, valuing the group at RM3.16 billion.