BANK Negara Malaysia’s (BNM) fee waiver extension for the Central Credit Reference Information System (CCRIS) report extractions to CTOS Digital Bhd until Dec 31, 2022 is unlikely to affect the company’s earnings prospects.
RHB Research which is neutral on the development said the sale of CCRIS reports do not directly contribute to its earnings. Nevertheless, the research house lowered its revenue by 8% following the extension but keep CTOS’ earnings unchanged for FY2022F.
“We factor in the impact of CCRIS fee waiver, resulting in lower FY2022F revenue by 8% but keep our earnings forecasts unchanged,” justified analyst Lee Meng Horng in a company update.
“The change in our forecasts would lift CTOS’ margin given the lower revenue base but it does not affect the quantum of profitability as the entire fee is a cost-pass through.”
Recall that the fee waiver was introduced back in June 2020 as part of the relief programme offered to banks due to the pandemic would expire on Dec 31 this year.
However, BNM via a letter dated Dec 17 to CTOS stated that the fee waiver for CCRIS report extractions will now be extended until Dec 31, 2022.
All-in-all, RHB Research maintained its “buy” rating on CTOS with an unchanged discounted cash flow (DCF)-derived target price of RM2.42.
“We remain positive on the prospects of CTOS given its unique growth preposition in the secular digitalisation trend such as the e-KYC (know your customer) solutions and credit rating-related solutions,” opined the research house.
“Besides potential M&A (merger & acquisition) angle to accelerate growth revenue on top of the three-year CAGR (compound annual growth rate) of 38.2% due to the organic growth from economic recovery, there are also various new solutions and new verticals.”
At 9.42am, CTOS was up 1 sen or 0.58% to RM1.74 with 783,600 shares traded, thus valuing the company at RM3.83 bil. – Dec 22, 2021
Photo credit: The Edge Markets
