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CTOS' proposal to increase stake in RAM to boost net gearing to 20 pct

09/09/2022 12:34 PM

KUALA LUMPUR, Sept 9 (Bernama) -- Maybank Investment Bank Bhd (Maybank IB) expects CTOS Digital Bhd's (CTOS) net gearing to increase from 10 per cent to 20 per cent following its proposed move to increase its stake in RAM Holdings Bhd, as the exercise is likely to be 100 per cent debt-funded.

CTOS has proposed to acquire 80,000 and 1.57 million shares in RAM from Deutsche Bank (M) Bhd and Dragonline Solutions Sdn Bhd for RM2.28 million and RM44.60 million, respectively, subsequently raising its total stake in RAM to 55.6 per cent from 39.1 per cent previously.

In a note today, Maybank IB said it has maintained its 'buy’ call on CTOS’ shares, with a slightly higher target price of RM1.94 after fine-tuning its estimation based on an unchanged price/earnings-to-growth (PEG) multiple of two times, which is the median PEG multiple of its regional peers.

“While we have already incorporated CTOS’ eventual 70 per cent stake in RAM by the first half of 2023 in our estimates, this exercise came in earlier than expected," it said.

It had also estimated that RAM would generate revenue of RM58 million and profit after tax (PAT) of RM14 million in financial year 2022 (FY2022).

“We also project RAM to post an annual growth of 10 per cent in both its revenue and PAT in FY2023-2024 as both revenue and cost synergies could be realised through cross-selling and rollout of new credit assessment products in the relatively-untapped small and medium enterprise (SME) segment," it said. 

Meanwhile, it added that the growing demand for credit lending solutions in the retail and SME segments should fuel CTOS’ growth as it continues to improve its offerings.

At 11.30 am, CTOS's share price rose two sen to RM1.44, with 737,400 shares changing hands. 


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