Malaysia’s CTOS reports strong Q3 results, set to ride SEA’s fintech wave

CTOS may not be a familiar name to readers, especially those outside Malaysia.

This is despite the credit reporting company having the largest IPO on Bursa Malaysia, the country’s stock exchange, in 2021. Retail demand for the 1.2 billion ringgit (US$253.2 million) IPO was the largest in eight years, which reflects CTOS’ position as the market leader in Malaysia.

Photo credit: Tech in Asia

The company was established in 1990, before the term fintech was even coined. Yet, it is set to benefit from the same trends driving the growth of the fintech sector in Malaysia and the wider region.

As a credit reporting firm, CTOS provides information to financial institutions so they can assess whether or not to lend to potential borrowers and how much they can disburse to them. Businesses also use the information provided by CTOS to determine the financial condition of potential partners. Its key customers include peer-to-peer lenders and ecommerce platforms.

Revenue and EBITDA up

Unlike many of today’s cash-burning fintech startups, CTOS is profitable and generates cash flow from its operations. It even pays shareholders a dividend.

Last week, the company announced healthy results for the third quarter of 2022. Revenue for the quarter was up 37% year on year, and EBITDA increased by 86% over the same period.

EBITDA margins expanded from 43% in Q3 2021 to 58% in the most recent quarter, which the company attributed to scalable organic growth and higher contribution from its associates.

The company’s operating expenses have generally gone up in line with revenue. However, for the first three quarters of this year, total operating expenses as a percentage of revenue was 62%, down from 67% in 2021, which hints at better economies of scale.

CTOS’ share price is currently 1.37 ringgit (US$0.29), up 25% from its IPO price of 1.10 ringgit (US$0.23), but down 26% year to date.

Riding the fintech wave

As tech players have grown and ventured into lending services in recent years, so has their demand for credit reports. CTOS is the dominant player in Malaysia, and it competes with the likes of CRIF Omesti and Dun & Bradstreet Malaysia – whose parent Credit Bureau Asia is listed in Singapore.

Malaysia’s upcoming digital banks and accelerating adoption of buy now, pay later services will further fuel demand for CTOS’ services.

Southeast Asia underpenetrated

Acquisition spree