CTOS: Business continuity not at risk following High Court decision - Maybank IB
As at 10.16am, CTOS was among the most active counters, declining 1.0 sen to RM1.24 with 21.63 million shares changing hands.
KUALA LUMPUR - CTOS Digital Bhd's business continuity is not at risk following the Kuala Lumpur High Court decision on March 11 to rule in favour of the plaintiff, Maybank Investment Bank (Maybank IB) said.
"Despite share price undergoing a steep 14 per cent correction yesterday, we believe regulatory risks to its business at this juncture are contained. As such, we upgrade CTOS to a ‘Buy’,” the investment bank said in a note today.
As at 10.16am, CTOS was among the most active counters, declining 1.0 sen to RM1.24 with 21.63 million shares changing hands.
On Tuesday, CTOS said its subsidiary, CTOS Data Systems Sdn Bhd, has filed an appeal against the High Court's ruling which ordered the company to pay RM200,000 to a resort director due to an inaccurate credit rating.
The company’s lawyer Ashok Kandiah, when contacted by Bernama yesterday, said that the appeal was submitted on March 8, one day following Judge Datuk Akhtar Tahir's decision.
In a separate note, Hong Leong Investment Bank (HLIB) estimated the potential impact on CTOS’ bottom-line is -30 per cent if the credit scoring business is stopped.
"We gathered there were no court injunction, stopping CTOS from continuing to offer credit scores to clients and there are no legal repercussions from doing so. For now, no change to our forecast. Considering that share price is already down more than 10 per cent, we believe the risk-reward now is skewed to the upside,” it said.
Meanwhile, RHB Research said that the direct-to-consumer segment, which accounts for about 9.0 per cent of group revenue, may see slower growth due to the negative publicity and implications from this case.
"We were made to understand that the court’s ruling in favour of the plaintiff was based on a defamation claim, rather than on the legality of providing value-added services such as credit scoring.
"Although highly unlikely, we may cut financial year 2024 forecast earnings by about 26 per cent under the worst-case scenario that credut rating agencies are not being allowed to formulate and sell proprietary credit scoring-related products/services,” it said. - BERNAMA
