Shares of Credit Bureau Asia (CBA) were too expensive to accumulate earlier this year. The stock had soared significantly since the company was listed on the Singapore Exchange late last year, hitting an all-time high of $1.54 on Jan 20. At that price, CBA was trading at 41.7 times its historical earnings.
But now, shares of CBA have rolled back some of those gains. The stock has fallen to $1.42 or 38.5 times earnings on Feb 5. This could present an entry point for investors to accumulate the stock.
CBA, which provides credit and risk information, could make an interesting addition to one’s portfolio. It is asset-light and has a strong market position in several countries. Moreover, it is as good as recession-proof given constant demand for credit and risk information regardless of the economic cycle. In addition, the company’s potential growth could be an upside to its share price.
CBA operates two types of businesses. Under its financial institution (FI) data business, it provides a wide range of derivative products and services to its subscribing members comprising banks and other financial institutions. These include credit scoring, data analytics, credit-monitoring services and customised solutions.
In Singapore, CBA’s FI data business is run by Credit Bureau Singapore (CBS), its indirect subsidiary. CBS is the dominant market leader and now has over 30 members, comprising the three local banks — DBS, Oversea-Chinese Banking Corp and UOB. Many of the international banks and credit providers are members too.
Overall, CBS maintains credit files of more than 3.7 million unique individuals and entities in Singapore. This translates to a credit bureau coverage rate (versus the entire population) of about 64.2% as at Dec 31, 2019.
In Cambodia, CBA’s FI data business is operated by its indirect subsidiary Credit Bureau (Cambodia) or CBC. The latter is the sole provider of financial information, credit reporting services, and analytical solutions to financial institutions and consumers there. CBC maintains credit files of more than six million individuals and about 21,000 business entities.
In Myanmar, the company’s FI data business is run by its indirect subsidiary Myanmar Credit Bureau (MMCB). The latter is also the sole credit bureau there after it was granted a non-exclusive licence in 2018 by the Central Bank of Myanmar, although it is unclear for now if the coup on Feb 1 might have an impact.
CBA also operates a non-FI data business in Singapore and Malaysia via its indirect subsidiaries: Dun & Bradstreet (Singapore) and Dun & Bradstreet (Malaysia). The two subsidiaries have a combined customer base of over 6,000 customers across both countries including MNCs such as Procter & Gamble, IBM, Canon, Hitachi, Samsung and Unilever.
In 1HFY2020 ended June 30, CBA’s earnings jumped 12% y-o-y to $3.7 million. The company’s revenue rose 4.6% y-o-y to $20.5 million. The company has net cash of $24.5 million as at June 20, 2020.
CBA’s financial performance could well improve further on discernible trends. For one, it will gain new customers from Singapore’s first digital banks, which are set to open shop from early 2022.
As credit grows and people use new lending platforms, digital banks will require more credit and risk information solutions to perform due diligence on their customers. “Naturally, they will become our members [too],” CBA founder and executive Kevin Koo told The Edge Singapore in an earlier interview.
Moneylenders will also be a growth driver for CBA. In October, CBS was awarded a tender by the Ministry of Law of Singapore to develop, establish and operate the Moneylenders Credit Bureau (MLCB) for three years. Koo says CBS will begin operating MLCB by the first quarter of 2021.
CBA also has plans to expand into other countries in Asia. For instance, Koo is eyeing Vietnam as well as Indonesia, where CBA has the right of first refusal to acquire an equity stake in NSP Indonesia Jaya (NSPIJ). The latter has a significant minority interest in Kredit Biro Indonesia Jaya (KBIJ), a credit bureau operator based in Indonesia. The company also has the right of first refusal to acquire an equity stake in HNN Technologies (HNN), an entity which licenses the source codes required for KBIJ’s operations.
