KUALA LUMPUR: Analysts have raised their target prices on CTOS Digital Bhd after it managed to overturn a ruling which would have open the flood gates for more suits against the company.

Yesterday, the Court of Appeal ruled that businesswoman Suriati Mohd Yusoff failed to make out a case in defamation, negligence or breach of statutory duty against CTOS, and set aside a lower court's award of RM200,000 in damages to Suriati over an inaccurate credit rating.

A three member bench also ruled that CTOS and that credit reporting agencies (CRA) may formulate and publish credit scores.T

Hong Leong Investment Bank Bhd research raised their target price marginally from RM1.50 to RM1.60, while RHB Innvestment Bank research attached a 27 per cent upside or target price of RM1.84 for the stock from RM1.77.

HLIB research maintained its Hold call on the stock, while RHB research stuck to its buy call.

RHB research said it raised its target price on the stock to RM1.84 after lowering the risk premium given the legality of credit scoring in CRA business is now settled and the dismissal of this dangerous precedent stemming from the initial High Court's ruling possiblly preventing a floodgate of claims against CTOS.

RHB research's target price includes a four per cent environment, social and governance (ESG) discount as its ESG score is below the country median.

"We continue to favour CTOS Digital as the leading credit reporting agency. It has a recession-proof business model and multiple growth avenues in the digitalisation age, which deliver solid earnings and cash flow generation," it said in its note.

Meanwhile, HLIB research said while the appeal win is positive for CTOS, it thinks the market had baked in a victory ahead of yesterday's court outcome; this is because its price had recovered to RM1.45/share from a low of RM1.05/share when the negative High Court ruling was first announced.

"That said, before the price plunge, CTOS only managed to reach a one-year peak of RM1.52/share and most of the time it was oscillating sideways.

Thus, we think share price upside from hereon could be rather limited," HLIB research said.

The firm's new valuation of CTOS implies a 27 times financial year 2025 price to earnings ratio, above global peers' average (GPA) of 22 times but in line with their 5-year mean of 28 times.

"The premium is fair, in our view, backed by the underpenetrated Aseanmarket, with high growth potential. We still find the company's risk-reward profile to be balanced," it said.

https://www.nst.com.my/business/corporate/2024/07/1074462/analysts-raise-ctos-digital-target-prices-after-it-quashes