Despite missing revenue expectations in 1HFY2021, Credit Bureau Asia (CBA) has initiatives in the pipeline that will drive a stronger latter half of the year, say CGS-CIMB Research analysts Andrea Choong and Darren Ong.
In an Aug 6 note, Choong and Ong are maintaining “add” on the company with a lowered target price of $1.43 from $1.53 on Aug 2. The new target price represents an upside of 10.9%.
Listed on the Singapore Exchange (SGX) since Dec 3, 2020, CBA operates as a credit and risk information solutions (CRIS) provider. It aggregates and repackages credit information into useable reports and data packets for sale to its customers, which span both financial institutions (FI) and non-FI clientele. Their products include one-off reports for loan applications, pre-employment checks and pre-screening of business partners, as well as customised monitoring services for higher-risk exposures.
See: Credit Bureau Asia to provide analytics and data solutions services in Vietnam with FiinGroup
CBA delivered a 1HFY2021 revenue growth of 8.5% to $22.3 million but missed Choong and Ong’s expectations by 8%. Adjusting for one-off items (listing expenses, job support scheme grants, disposal of Credit Bureau Malaysia), 1HFY2021 profit after tax (PAT) rose 15% y-o-y to $8.8 million, forming 43% of their FY2021F forecast.
“The miss came mainly from a relatively slower pace of revenue growth in the non-FI data business, which expanded 4.9% y-o-y to $12.6 million in 1HFY2021 nonetheless. Earnings growth from the FI data segment rose comparably faster at 13.4% y-o-y to $9.7 million in 1HFY2021, supported by stronger demand for new credit applications and reviews,” write Choong and Ong.
CBA declared its inaugural interim dividend per share (DPS) of 1.7 cents, implying a 100% dividend payout ratio — ahead of management’s 90% guidance for FY2021F-22F. “However, we cut our DPS estimates to 3.7 cents in FY2021F, in line with our lower earnings estimates,” say Choong and Ong.
See also: Credit Bureau Asia's venture into Vietnam gets it a thumbs up from CGS-CIMB
Choong and Ong expect a stronger 2HFY2021F for CBA from sustained volume growth in bulk risk reviews and new credit applications from its FI data business (higher profit margins); and new initiatives, such as cross-selling credit information and product development using data from the Moneylenders Credit Bureau, and leveraging on its current data pool to develop analytics solutions.
The Credit Bureau Act came into effect in May 2021, allowing the Monetary Authority of Singapore to license and supervise credit bureaus in Singapore. To this end, CBA will apply (by end-2021) for the sole licence to collect and use commercial credit information from FIs.
Discussions are underway to sign on all four new digital banks in Singapore as members of Credit Bureau Singapore.
“While providing volume upside, we are cognisant that two of the four new licences issued are digital wholesale banks, which would garner lower (although higher-valued) volumes. CBA’s Cambodian operations continued to execute well in 1HFY2021, with higher credit report sales. In Myanmar, CBA has signed up some 30 FIs as bureau members and hopes to be operational by end-FY2021F.”
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As at 3.56pm, shares in Credit Bureau Asia are trading flat at $1.29, or 31.35 times CGS-CIMB’s price-to-earnings forecast for the year.
Photo: Credit Bureau Asia
