Credit Bureau Asia Limited (“CBA”) (SGX:TCU) debuted at S$1.15 on the Singapore Stock Exchange (SGX)’s mainboard on 3 December 2020, 23.7% above its initial public offering (IPO) price of S$0.93 per share. If you are looking at CBA with interest, here are 10 things to know before you invest.  

1. Introduction to the group 

CBA is a leading player in the credit and risk information solutions (CRIS) market in Southeast Asia, providing CRIS to an extensive client base of banks, financial institutions, multinational corporations, telecommunication companies, government bodies and public agencies, local enterprises and individuals across Singapore, Malaysia, Cambodia and Myanmar. 

CBA assists its customers to make better-informed, timely decisions by enhancing their risk-assessment and decision-making processes with the help of its products and services which include credit and risk information reports, credit scores, monitoring services, data trends and analytics, and client-specific tailored solutions. 

The full structure of the group as at the date of the prospectus is as follows:

https://dollarsandsense.sg/wp-content/uploads/2020/11/CBS_Company-Structure.png

(Source: IPO prospectus)

2.  Business model 

The group has two core business segments – the financial institution data business (“FI Data Business”), and the non-financial institution data business (“Non-FI Data Business”).

FI Data Business

CBA has established credit bureaus in Singapore, Cambodia and Myanmar through joint ventures with local and international partners. Depending on the territory involved, these credit bureaus operate to provide their subscribing members, mainly banks and financial institutions, with access to consumer and/ or commercial credit reports, all of which are generated from up-to-date credit information contributed by subscribing members.

Non-FI Data Business

In Singapore and Malaysia, CBA has established joint venture partnerships with Dun & Bradstreet and operate through its subsidiaries Dun & Bradstreet (Singapore) Pte Ltd and Dun & Bradstreet (D&B) Malaysia Sdn Bhd to provide customers with a wide range of business information and risk management services, sales and marketing solutions, commercial insights and other services, using data sourced from a variety of publicly accessible registries and the D&B Worldwide Network as well as information contributed by businesses which subscribe to its payment bureau services. 

3. Revenue composition and principal markets 

CBA’s Non-FI Data Business is the larger business segment, making up approximately 58.3% of group revenue in 2019 in comparison with the FI Data Business’s contribution of 41.7%. Moreover, revenue growth of the Non-FI Data Business segment is much faster at a compound annual growth rate (CAGR) 8.9% of versus revenue growth of 3.8% in the FI Data Business. 

(Source: IPO prospectus)

CBA’s principal markets are Singapore and Malaysia.  In fact, 97.1% of the group’s revenue is derived from its home market of Singapore. 

(Source: IPO prospectus)

4. Major customers

CBA’s top five customers’ contribution makes up approximately 48.9% of the group’s revenue in FY2019. Save for Dun & Bradstreet (Asia Pacific) Pte Ltd (“D&B APAC”), CBA’s major customers comprise all major retail banks and financial institutions who subscribe for access to customer credit reports or commercial credit reports, or both, to facilitate their risk and creditworthiness assessment procedures when granting or maintaining loans to individuals or business entities. The increase in sales to D&B APAC is due primarily to the increase in commercial credit reports and data packets sold to international customers by D&B APAC. 

(Source: IPO prospectus)

5. Competitive landscape

FI Data Business

As at June 2020, there are only two approved credit bureaus in Singapore: Credit Bureau (Singapore) Pte Ltd (“CBS”) (75% subsidiary of CBA) and Experian Credit Bureau Singapore Pte Ltd (“Experian CB”). 

Since its establishment, CBS dominate the credit bureau industry in Singapore, due to having 31 FIs as part of its network and establishing itself as the go-to credit bureau with the largest database of information. Experian CB has only 4 member FIs, and as such has a limited database of credit and risk information, and therefore a limited number of customers. 

As of 2018, Frost & Sullivan estimates CBA’s market share of FI Data Business in Singapore to be close to a monopoly of 99.9%. 

(Source: IPO prospectus)

Non-FI Data Business

In terms of size and market share, Dun & Bradstreet (Singapore) Pte Ltd (“D&B Singapore”) (81% subsidiary of CBA) and Experian Credit Services Singapore Pte Ltd (“Experian CS”) are the two largest players. Nevertheless, the market of Non-FI Data is fragmented as it is unregulated. Another small player is Crif BizInsights Pte Ltd (“Crif BizInsights”). 

As of 2018, Frost & Sullivan estimates that Experian CS holds the largest market share at approximately 57.0%, followed by D&B Singapore with an approximate 40.0% market share. Meanwhile, Crif BizInsights hold the remainder of 3% market share.

(Source: IPO prospectus)

6. Substantial shareholders

Prior to the IPO, Mr. Kevin Koo, the Executive Chairman and CEO of CBA owns 90.0% of the company; while Mr. William Lim, an Executive Director of CBA owns the remaining 10.0%. Upon listing, Mr. Kevin Koo’s stake in the group drops to 67.3%, while Mr. William Lim’s stake reduces to 7.5%. Separately, cornerstone investors Aberdeen Standard Investments (Asia) Limited, Affin Hwang Asset Management Berhad, Eastspring Investments (Singapore) Limited and Tokyo Shoko Research, Ltd. will take up a 12.2% stake in CBA. 

Mr. Kevin Koo is the founder of CBA. Since establishing the credit information business in Singapore in 1993, he has over 25 years of experience in the credit information industry and has been instrumental to the success and expansion of the group. He is responsible for the group’s strategic direction and oversees the overall growth and performance of the group. 

Prior to venturing into the credit and risk information industry, Mr. Koo graduated with a degree from the Robert Schumann University of Music Dusseldorf, Germany in 1986. He was also awarded the Deutscher Akademischer Austausch Dienst Scholarship by the Public Service Commission in 1981. 

Meanwhile, Mr. William Lim has close to 20 years of experience in the credit information industry. He oversees the business operations of the group as a whole, including aspects such as operations, legal and regulatory and information. Before joining CBA, Mr. Lim was a partner in a Singapore law firm between 1994 and 1999. Prior to this, he served in the Singapore Legal Service Commission as a deputy registrar, magistrate, and district judge between 1989 and 1994.  

7. Use of IPO proceeds and future plans

CBA intends to use the S$27.0 million gross proceeds raised from the IPO in the following manner: 

  • 26.0% will go towards organic growth initiatives;
  • 44.0 % on strategic investments, regional expansion and acquisitions;
  • 18.0 % for general corporate and working capital; and
  • 12.0% for payment of underwriting and placement commission and offering expenses.

In terms of future plans, CBA will continue to drive for organic growth in the Singapore market by making preparations to provide corporate credit reporting through CBS under the commercial bureau operator license which the group intends to apply. 

Separately, with the increased saturation of the Singapore market, CBA has plans to penetrate Cambodia and Myanmar by introducing product offerings and services that cater to these markets.

The diagram below details the business strategies and future plans of the group. 

(Source: IPO prospectus)

9. Financial highlights 

CBA has done relatively well financially in the past few years. Revenue and profits after tax have been growing at a healthy clip CAGR of 6.7% and 18.4% from FY2017 to FY2019. Further, its asset-light business model means the group cancash-generative consistently record juicy net profit margins of over 30.0% across the same period. 

While the group does not have a fixed dividend policy, management has indicated that it intends to recommend dividends of at least 90.0% of net profit after tax attributable to shareholders for FY2021 and FY2022. 

https://dollarsandsense.sg/wp-content/uploads/2020/11/Financial-Performance-Credit-Bureau-Asia.png

(Source: IPO prospectus)

(Source: IPO prospectus)

10. Current valuation 

With a closing share price of S$1.02 as at 4 December 2020, CBA is trading at a market capitalisation close to S$235.0 million. At this valuation, the group has a trailing price to earnings ratio (PER) of 33.6 and indicative yield of 2.7%. The group may not be cheap but its cash generative business offers risk-averse investors a unique mixture of growth and stable income which is well worth a close look.  

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