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KUALA LUMPUR: CTOS Digital Bhd’s earnings growth is well on track with its additional stake purchase in Business Online PCL as it rolls out plans to tap into high-growth sectors.
CTOS recently announced it had acquired an additional 2.65% stake, or 21.74 million shares, in Business Online for RM26.8mil, which brings its total stake in the company to 22.65%.
According to Kenanga Research, the timing of the acquisition was a positive surprise as CTOS had just completed its 4.625% acquisition in RAM Holdings on July 29 this year.
“The faster-than-expected acquisitions, coupled with plans to tap into new sectors with tremendous growth potential such as automotive, insurance and real estate (combined 2021-2025 compounded annual growth rate of 50.6%) have boosted our confidence in CTOS’ earnings growth in the coming years.
“Post-Business Online acquisition, we estimate CTOS’ cash balances at RM35mil, with RM21.8mil initial public offering proceeds earmarked for strategic investments,” it said.
The research house said the acquisition price translates to financial year 2020 (FY20) price-earnings ratio (PER) of about 44 times, which is in line with global peers’ PER of about 40 times.
“The increased stake in the Thai leading credit bureau Business Online (about 59% market share) allows CTOS to further tap into an underpenetrated Thailand (about 57% penetration versus developed United States and United Kingdom’s 100%),” said Kenanga.
It added that Business Online’s first-half FY21 earnings are about 30% higher year-on-year. Kenanga reiterated its “outperform” rating on the stock with a higher target price of RM1.75 from RM1.40 previously, based on higher FY22 price-earnings ratio of 55 times from 45 times previously.