CTOS Digital Berhad (KLSE: CTOS) (“CTOS”) made a strong debut on the Main Market of Bursa Malaysia on 19 July 2021. Shares of the company have been on a tear, rising over 87.0% since its listing delighting early investors.   

CTOS has recently reported its latest financial results for the second quarter ended 30 September 2021. We will now catch up with the group by checking on its recent business performance and major corporate developments. 

1. Revenue grew to RM114.4 million, while net profit increased to RM31.2 million 

For the nine months ended 30 September 2021, its group revenue grew to RM114.4 million, 15.8% higher than RM98.8 million in the preceding year, on the back of strong demand from all three customer segments (Key Accounts, Commercial and Direct-to-Consumer). 

Meanwhile, net profit for the nine months ended 30 September 2021 increased to RM31.2 million, versus RM26.3 million in the similar period last year. 

CTOS CEO Dennis Martin said, “Our key accounts and commercial segments remained resilient with commendable growth despite multiple lockdowns throughout the year. 

“Notably, we achieved substantial traction in our direct-to-consumer segment, where revenue nearly doubled in the first nine months of 2021 compared with the year before. 

“We look to extend this growth trajectory by extending our on-going financial literacy programmes to increase customer adoption of relevant products.

“With the reopening of various economic sectors in Q4’2021, we anticipate a rebound in customer take-up solutions, similar to previous post-restriction periods.” 

2. Share of associates profit reached RM5.6 million 

CTOS’ share of associates profit was RM5.6 million in the nine month of 2021, of which the majority was contributed by Business Online Public Co Ltd (“BOL”), the leading commercial credit information and risk management provider in Thailand. 

CTOS had on 6 August 2021, acquired an additional 21.74 million ordinary shares in BOL for a purchase consideration of THB208.7 million or equivalent to RM26.8 million. Upon completion of the acquisition, CTOS’ shareholdings in BOL increased to 22.65%.

3. Healthy balance sheet and cash flow

The group’s financial position remains healthy as it is in a net cash position as at 30 September 2021. 

The group generated net cash from operating activities of RM44.7 million for the nine months ended 30 September 2021. 

Furthermore, the group achieved free cash flow of RM40.9 million over the same period.    

4. Second interim dividend of 0.32 sen per ordinary share 

CTOS declared a second interim single tier dividend of 0.32 sen per ordinary share, with the ex-date on 11 November and Payment on 10 December, 2021.

Alongside the first interim single-tier dividend of 0.533 sen per ordinary share paid on 3 September 2021, the group has declared 0.853 sen per share or RM18.8 million in dividends for 2021, also equivalent to 60.0% of net profit for the first 9 months of 2021.

5.  CTOS acquires strategic stake in RAM Holdings

On 29 July 2021, CTOS announced that it had entered into a share purchase agreement (SPA) with CIMB Bank Berhad to acquire 462,500 ordinary shares or 4.6% stake in credit rating agency, RAM Holdings Berhad (“RAM”) for RM10.1 million. 

CTOS CEO Dennis Martin said: “RAM is the market leader in bond rating industry in Malaysia. They also offer a range of solutions ranging from economic and debt market research, data and analytics and sustainability services. We believe there are strong synergies in both product offerings and customer base between both companies which we will look to realize on moving forward.”

6. Temporary suspension of access to Central Credit Reference Information System (“CCRIS”) 

CTOS’ subsidiary, CTOS Data Systems Sdn Bhd, had on 30 September 2021, received a letter/ directive from Bank Negara Malaysia (“BNM”) relating to the temporary suspension of access to CCRIS for all Credit Reporting Agencies (“CRA”) with immediate effect.

The group said that the temporary suspension is a proactive, precautionary and necessary step against potential cyber threats and possibility of data leak incident in the credit reporting industry.

Pursuant to BNM’s suspension decision, CDS has momentarily halted reports and services containing CCRIS information on its platform whilst it is working expeditiously to resume these services as quickly as possible. The rest of its portfolio of services remain available to customer. 

Management has assured investors that the temporary suspension is not expected to cause any material impact to the group’s financials at this juncture. 

7. Prospects of the group

As Malaysia moves away from the various versions of restrictions related to the Covid-19 pandemic and the economy begins to open up, the group expects its companies and business segments to rebound in the last quarter of 2021.

For the financial year ending 31 December 2021, CTOS will continue to deliver on its digital solutions such as eKYC to its extensive Key Account customer base.

The Commercial segment should see growth through new account activations, providing small medium enterprises (SMEs) the tools that will help them to make informed decisions on granting credit or credit terms to their customers as well as helping them to reinforce good payment behaviour to enhance their cash collection rates as part of their own business recovery strategies.

Furthermore, CTOS will also continue to expand on its financial literary programs in 2021, as a means to create awareness and demand for its services.  

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