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Credit Suisse, CGS-CIMB initiate coverage on NYSE-listed TDCX with bullish calls

The Edge Singapore
The Edge Singapore • 2 min read
Credit Suisse, CGS-CIMB initiate coverage on NYSE-listed TDCX with bullish calls
TDCX was wrongly clubbed with other high growth stocks with negative profitability in the recent correction.
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Credit Suisse has initiated coverage on TDCX with an “outperform” call and US$24.50 target price.

The company, based in Singapore but listed recently on the New York Stock Exchange, provides so-called digital customer experience solutions.

The company was listed at US$18, raising some US$400 million from its IPO. It reached a peak of US$30 in late October and has since then dropped to US$12.16 as of Jan 26 in line with overall weakness in the US tech sector.

"We believe the recent stock price correction offers a compelling opportunity to accumulate a high quality growth stock with positive cash flows," write Credit Suisse analysts Varun Ahuja and Kylie Wan in their Jan 27 report.

"TDCX was wrongly clubbed with other high growth stocks with negative profitability in the recent correction, in our view," they add.

CGS-CIMB analysts Ong Khang Chuen and Kenneth Tan had on Jan 21 too initiated coverage on the stock with a “buy” call and US$24 target price.

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TDCX’s total addressable market is likely to grow at a CAGR of 13% to hit US$4 billion come 2025. “Given its strong pedigree in SE Asia, TDCX is well-positioned to capture the robust growth potential, the analysts note.

According to Credit Suisse, even as the fifth-largest customer experience provider in this field, TDCX, which is closely held by founder and CEO Laurent Junique, has a market share of just 3.2% in 2020, which suggests more room for growth within this fragmented market.

Ahuja and Wan describe TDCX's advantage in providing high value-added digital services, with a focus on multi-lingual capabilities to new economy companies, evidenced by its high revenue per employee and EBIT margins. In addition, TDCX has lower employee attrition rates than its peers.

See also: Maybank downgrades ComfortDelGro in contrarian call over Addison Lee acquisition worries

The analysts estimate TDCX to grow its earnings at a CAGR of 29%, with contributions from newly acquired clients across different industries.

Photo: Albert Chua / The Edge Singapore

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