CTOS counter at all-time low, expat management passing leadership baton
CREDIT reporting agency CTOS Digital Bhd, with its shares hitting near all-time low, is seeing the departure of its chief at a time when it missed targets for three consecutive quarters.
In a report released on April 28, BIMB Securities maintained its 'Buy' call on the counter but loweredits 52-week target price (TP) to RM1.27 from RM1.33 to reflect its trimmed FY25 earnings.
On the same day, HLIB Research downgraded the counter to a 'Hold' from 'Buy' on April 28 with a TP of RM1.10.
CTOS closed at 99 sen on Wednesday, after hitting a 52-week high of RM1.51.
For the first quarter ended March 31, 2025 (1Q25), CTOS's net profit plunged 31% to RM14.4 million on a turnover of RM76.1 million which was up 6% from the same period last year.
The segment profit from the Malaysia operations decreased by 29% to RM17.8 million compared to RM25.2 million in the corresponding period, mainly due to higher sales but offset by higher operational expenditures, it told the exchange.
On April 25, CTOS also informed Bursa Malaysia the impending departure of its group CEO Erick Hamburger 'to explore new career opportunities.'
It said both sides have mutually agreed that Hamburger's last day of employment will be on Sept 30 and Erick will be on leave from May 1.
Until a suitable candidate has been identified, CTOS said the board has appointed its non-independent director Kevin Loh Kok Leong as Interim GCEO with effect from May 1.
In its report, BIMB Securities, a unit of Bank Islam Malaysia Bhd (BIMB), noted the resignation of Hamburger and group chief technical officer James Fancourt Mitchell.
'This development is not entirely surprising after CTOS missed targets for three consecutive quarters. A wave of staff departures and market chatter around a key shareholder-led overhaul was on-going. On the bright side, this is arguably the right moment for the expat management to pass the baton to leadership with deeper local roots,' it said.
While the basics and foundations of the CRA model can be replicated easily from developed markets, it said long-term success ultimately hinges on local adaptation and customisations.
On its outlook, it said the business should continue to expand, supported by solid macro drivers and established systems and its brand prominence.
HLIB Research said it noted that CTOS' 1Q25 core profit fell 31% year-on-year (YoY) due to lower gross profit margin (weighed down by less favourable sales mix) and higher opex (rise in marketing and administrative costs).
'Overall, results were below expectations and thus, we cut FY25-26 earnings by 14-15%. Also, we introduced FY27 estimates and flagged a potential profit cliff that unfortunately requires a recalibration in investor expectations. As such, the stock's risk-reward profile is no longer as compelling as before,' it said. — TMR
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