Kenanga initiates coverage on CTOS (5301) CTOS DIGITAL BERHAD with 'outperform'
KUALA LUMPUR: Kenanga Research has initiated coverage on CTOS Digital Bhd on expectation that the credit reporting agency stands to benefit from a growing customer base and expansion of product offerings in an underpenetrated market.
The research house said it believes CTOS deserves a greater premium over its IPO price of RM1.10 per share, which represents a valuation of FY22 price-earnings of 35.5x versus about 31x of its regional peers'.
It pinned a fair value of RM1.40 to the counter, pegged to FY22E 45x PER.
According to Kenanga, CTOS has potential to grow its customer base and expand its product offerings in Malaysia, which is an underpenetrated market with a superior CAGR of 13.2% as compared to that of the US and the UK.
There will also be cross-selling opportunities as the group usually launches one to two new products annually, it added.
Meanwhile, CTOS stands to benefit from growing market size during economic growth while benefiting in an economic slowdown from greater frequency of credit checks and stronger demand for its management and monitoring solutions.
The firm also aims to expand into new sectors with tremendous growth potential such as automotive, insurance and real estate.
"The total addressable market for the trio is forecast to grow from RM25.1m in 2021 to RM128.9m in 2025, representing CAGR of 50.6%.
"CTOS recently launched its new digital solution – CTOS Tenant Screening Report CTOS, which will enable it to tap into the real estate sector," said Kenanga.