A leading CRA with a “recession-proof business and growth avenues in the digitalisation age” company in Malaysia

Some analysts are optimistic about CTOS Digital Bhd’s future despite the uncertainty surrounding the company.

Citing the potential for a favourable outcome in the credit reporting agency’s (CRA) appeal against a recent High Court decision, some brokerages are maintaining their earnings forecasts for the company and recommending a “buy” on the stock.

The recent decline in CTOS shares, in the opinion of RHB Research, has been overdone, offering investors a chance to buy stock in a top CRA.  However, the brokerage also noted that the risk premium on CTOS had increased.

RHB Research maintained its “buy” call on CTOS but lowered its target price for the stock to RM1.77 from RM1.93 previously. Following a conference call with the company, the research firm reported that management had clarified certain aspects of the recent legal judgement against the company, confirming the absence of an injunction that allows CTOS to continue operating and the legality of formulating credit scores.

On the other hand, Hong Leong Investment Bank Research maintained its “buy” call on CTOS but with a lower target price of RM1.45 compared to RM1.75 previously. Maybank Investment Bank Research downgraded CTOS to a “hold” from a “buy” with an unchanged target price of RM2.10.

Maintaining a cautious view, Kenanga Research argued that until the High Court’s interpretation is overturned, it still poses a challenge to CTOS’ business model. It could take three to six months to complete the appeals procedure. With a target price of RM1.15, Kenanga Research maintained its “underperform” call on CTOS.

On March 11, the High Court ruled that CTOS must compensate a businesswoman RM200,000 in damages and RM50,000 in costs for losses stemming from an inaccurate credit rating by the agency.

The High Court asserted during the ruling that CTOS had exceeded its legal authority by providing credit scoring facilities, as the Credit Reporting Agencies Act 2010 (CRAA) does not authorize the agency to formulate a credit score for its customers. Legally, CTOS is only permitted to act as a repository of credit information for its subscribers.

For more information about the company, visit their website at here.