MALAYSIA’s largest initial public offering (IPO) for 2021 CTOS Digital Bhd saw its share price went through the roof at its debut on Bursa Malaysia today, touching an intra-day high of RM1.76 or 60% gain from its IPO price of RM1.10.
At time of writing (10.24am), the share price has consolidated to RM1.59, up 49 sen or 44.55% with 206.34 million shares traded, thus valuing the company at RM3.14 bil. The FBM KLCI was up 5.09 points or 0.33% to 1,527.57.
At its present share price, CTOS has exceeded the target price of RM1.40 accorded by Kenanga Research which accorded the behemoth credit rating agency (CRA) with an “outperform” rating.
Earlier on July 5, both TA Securities Research and JF Apex Securities Research has ascribed a fair value of RM1.25 for CTOS.
“CTOS stands to benefit from a growing customer base and expansion of product offerings in an under-penetrated market,” opined analyst Adrian Kok in an initial coverage report. “We also like its resilient business model and future plans to tap into new sectors with tremendous growth potential.
Kenanga Research further justified its RM1.40 fair value which is pegged to FY2022E 45 times price-to-earnings ratio (PER) to CTOS’ (i) market leader status with 71.2% share in an under penetrated market, (ii) more robust industry growth (2021-2025E CAGR [compound annual growth rate] of 13.2%) vs peers in developed nations such as US (7.5%) and UK (5.3%), (iii) superior earnings growth of 47-18% (vs peers’ 12-14%) as well as (iv) scarcity premium for ASEAN-listed CRA (where the growth potential is high).
The performance of Malaysia’s largest home improvement chain MR DIY Group (M) Bhd (debuted at RM1.60 on Oct 26) that soared to its present price in the RM3.45 level, says a lot about CTOS’s backer, the home-grown private equity firm Creador Sdn Bhd. Recall that the Main Market counter had attracted the largest number of institutional investors participating in a Malaysian IPO.
A total of 23 cornerstone investors participated in the institutional offering of the IPO, including renowned names such as the Employees Provident Fund (EPF), Permodalan Nasional Bhd (PNB), Aberdeen Standard Investment, AIA, Eastspring Investments, FIL Investment Management and JP Morgan Asset Management.
CTOS’ IPO exercise entails the public issue of 200 million new shares and an offer-for-sale allocation of 900 million existing shares which are priced at RM1.10/share.
Out of the RM220 mil IPO proceeds, RM155.2 mil will be used for the repayment of all bank borrowings to free up debt headroom, while RM59 mil will be earmarked for synergistic investment and acquisition of target companies. The remaining RM6.1 mil will be utilised to defray listing fees and expenses. – July 19, 2021
