Leading credit reporting agency. Listed in the market since July 2021, CTOS is a leading regional credit bureau in the ASEAN, with a presence in Malaysia and Thailand. The group’s primary business includes providing credit information, analytics, and digital solutions to companies, businesses, and consumers at various stages of their life cycle. Over the years, CTOS has performed multiple M&As with different credit rating agencies (CRAs) to become one of the top CRAs in Malaysia, with now having 71.2% market share.

Huge growth potential in Asian CRAs business. CTOS’s medium to long term prospects will continue to be supported by the huge growth potential in the ASEAN Credit Reporting Industry, underpinned by a faster growth of 13.2% CAGR from 2021- 2025 (based on IDC) against developed counties (US: 7.5% and UK: 5.3%) and the ASEAN region (10.8% between 2021 and 2025 to RM 1.61bn). This is mainly driven by the combination of increasing demand for credit in ASEAN and low penetration in the credit reporting industry (Malaysia’s credit reporting revenue per capita: RM6.9 versus US: RM84.3).

Riding on the digital banking initiative. As Bank Negara Malaysia is at the final stage to award up to five digital banking licenses in 1Q22, we believe CTOS’s comprehensive digital service such as e-KYC will continue to play a crucial role in limiting the potential credit risk. In light that digital banks are expected to be more simplified in lending management coupled with more competitive rates – due to low-cost business model, this bodes well for CTOS in anticipation of increased volume amid faster approvals and disbursement of funds from digital banks as well as the greater penetration in the local credit reporting market.

Double bottom. Technically, we expect CTOS to stage a downtrend reversal soon, pending a double bottom formation as indicators are showing uptick bias. A successful breakout above its neckline of RM1.85 will spur the price toward RM1.90-2.10 territory. Cut lost at RM1.66.

Source: Hong Leong Investment Bank Research - 14 Feb 2022