MALAYSIA’S leading credit reporting agency CTOS Digital Bhd which has been on a downslide of late closed at RM1.62 yesterday (Feb 23) which coincidentally was the same price it ended on its maiden day trading on July 19 last year.
Back then, that was a cause for celebration as the RM1.62 price tag was a 47% premium over the company’s initial public offering price (IPO) of RM1.10 (CTOS had commenced trading at RM1.50).
But this time around, the RM1.62 tag came more as a shocker to faithful or high-hoper investors as this marked a 30% decline from CTOS Digital’s all-time high of RM2.10 (posted on Oct 7 last year).
Six months down the road, many would have expected CTOS Digital to emulate the success story of its ‘sister company’ Mr DIY Group (M) Bhd by virtue of both being backed by the same private equity (PE) fund backer, Creador.
Benchmarking CTOS Digital against Mr DIY may not be the wisest thing to do as both companies are from different sectors although both are listed on the Main Market of Bursa Malaysia.
Another often overlooked fact is that CTOS Digital is trading at a very steep valuation – a FY2022 estimated PER (price-to-earnings ratio) of 57 times or a 82% premium to peers – of whom some are big names in this sector such as Experian Plc which is listed on the London Stock Exchange and Equifax Inc on the New York Stock Exchange.
Anyway, it remains to be seen if CTOS Digital’s share price shall stabilise following its announcement yesterday that the company has finalised the issue price of its proposed primary placement exercise at RM1.58/share to raise a total of RM173.8 mil in proceeds for the group.
The proceeds would partially fund the group’s RM205.8 mil acquisition of a 49% stake in fintech specialist Juris Technologies (JurisTech) – which some market observers touted as “over-rated” – with the balance funded by bank borrowings. The acquisition is slated for completion in 1Q 2022.
Under the proposed primary placement exercise, the group would issue a total of 110 million new shares representing 5% of the total number of issued CTOS Digital shares. Upon the listing of the new shares in early March 2022, CTOS Digital’s issued share capital would enlarge from 2.20 billion shares to 2.31 billion shares.
The issue price per share of RM1.58 represents a 6.5% discount to five-day volume weighted average price (VWAP) up to and including Feb 21 being the market day immediately prior to the price fixing date.
Following the strong demand for this placement, CTOS Digital said Creador via Inodes Ltd has placed 185 million shares it owns in CTOS Digital at the same price of RM1.58, its first placement since the company’s IPO last July.
This pares Inodes’ shareholding in CTOS Digital from 40.0% to 30.1% post issuance of the primary placement.
“The management of CTOS Digital has internally targeted strong growth in our net profit by up to 30% circa RM75-80 mil in the current financial year ending Dec 31, 2022 (FY2022), buoyed by new contributions from JurisTech as well as the stronger uplift in our existing businesses in line with the rebounding economy,” projected the company.
“We do not envision any further sale in the foreseeable future and remains excited about the long-term growth of the company.
“The firms sees tremendous growth opportunities in new product solutions for key accounts and higher penetration of small medium enterprise (SME) market. In addition, JurisTech brings new solutions which are relevant to CTOS Digital and there are significant synergies.” – Feb 24, 2022
