3 days ago
- Business
- New Straits Times
CTOS' latest interim results fall short as firm lowers FY2025 revenue guidance
KUALA LUMPUR: CTOS Digital Bhd's first half of 2025 (1H25) results fell short of expectations due to the pressure from a weaker gross margin in the second quarter due to an unfavourable sales mix, said CIMB Securities.
The results reached just 35 per cent of CIMB Securities's and 33 per cent of consensus full-year forecasts.
"CTOS declared a second interim dividend per share (DPS) of 0.65 sen, bringing 1H25 DPS to 1.09 sen - below our expectations.
"Meanwhile, net profit declined 22.4 per cent year on year (YoY) to RM36.7 million in 1H25, weighed down by the less-favourable sales mix and higher operating costs," it said in a note.
CIMB Securities said CTOS had lowered its financial year 2025 (FY25) revenue guidance to RM320 million from RM352 million and its FY25 net profit forecast to RM87.5 million from RM120.5 million at the mid-point.
This implies a 19 per cent YoY decline in net profit in FY25F, down from the previously guided 11 per cent growth.
"The downgrade reflects delays in project conversion due to extended sales cycles, a strategic shift to exit low-yielding projects, and a change in several customers' spending patterns.
"While ongoing cost optimisation efforts should support a rebound in 2H25, earnings are still expected to remain below 2H24 levels," it said.
CIMB Securities cut its FY25 to FY27 earning per share (EPS) estimates by 24–32 per cent to reflect a less-favourable sales mix.
This is due to slower conversion in the higher-margin key account and commercial segments, as well as higher tax expenses starting FY26.
"CTOS' pioneer tax status is set to expire in November 2026, which may lead to higher effective tax rates in FY27. We now forecast a 26 per cent YoY net profit decline in FY25, followed by a recovery to 13 per cent growth in FY26.
"With the downward revisions to our earnings forecasts, we downgrade the stock to Hold from Buy with a lower target price of 90 sen," it added.
