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 CTOS 5301 CTOS DIGITAL BERHAD's FY22-24 earnings to rise by 17-22pc, say HLIB Research

KUALA LUMPUR: Hong Leong Investment Bank (HLIB Research) expects CTOS Digital Bhd's financial year 2022 (FY22) to FY24 profit to rise by 17-22 per cent.

The bank-backed research firm said the growth would be driven by its recent purchase of Juris Technologies Sdn Bhd (JurisTech) and Business Online Public Co Ltd (BOL) stakes.

This has boosted the growth upwards of the company by four percentage points (ppt), the research firm noted.

"Also, we assumed the Malaysia Digital Economy Corporation (MDEC) tax incentives would be renewed, as, without this, it would shave 20 per cent off our current earnings projection," it said.

When stacked against the estimates of its previous analyst, HLIB Research said the upcoming three-year profit forecasts are comparable, with a mere less than five per cent variance.

Separately, the firm notes that both the acquisitions mentioned above would cost RM232 million, where the split between equity/debt funding is 75/25 per cent.

"Accordingly, CTOS Digital is also expected to be in a slight net debt position again in FY22 before returning to a net cash company in FY23.

"As such, we like that it has ample balance sheet headroom to expedite business strategies," it said.

Considering that the share price has skidded 15 per cent year to date (YTD), HLIB Research finds that CTOS Digital's risk-reward profile has become even more attractive and reckons it is a good opportunity to accumulate the stock.

"We like the company for its market leadership position, strong economic moat, and highly scalable business model.

"We maintain a Buy call on the stock with a refreshed target price of RM1.95 from RM2.45," it added.

https://www.nst.com.my/business/2022/04/788249/ctos-digitals-fy22-24-earnings-rise-17-22pc-say-hlib-research

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