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For now, if possible, we want to find a safer investment that brings a decent return. So I think investing in IPO shares is usually profitable, but you have to look at the type of company as well. There is still the possibility of losing if you choose the wrong sector and company.
It is true that buying and selling shares is a high risk category, but for CTOS Digital Berhad’s latest IPO, it looks like there is a high potential to move forward.
P/S: This is not a buy call, but this is the process of us learning a little bit about this company.
What is CTOS business?
Company that provides report for individual credit rating. It’s normal before we apply for a loan, right, the bank will check our credit rating/loan performance? So, this CTOS can supply that information.
How many shares are there?
Existing stock: 2 billion
Current Major Shareholder: Creator (1.6 billion or 80%)
Who is Creator?
Companies that invest in BIGPharmacy, Mr DIY, Bake With Yen, Tealive, CTOS and other potential companies. Mr DIY had just done the IPO that day and his shares were booming. You can see here.
What is an Initial Public Offering (IPO)?
In simple terms, it is the first time a company wants to list its shares on the Stock Exchange and the public has already started to buy their shares.
Total IPO shares for sale: 900 shares + 200 shares
A unit of IPO shares: RM1.10
200 shares: Issuance of new shares
Creador will sell 720 shares out of 900 existing shares, the rest will be sold by other existing shareholders.
Market Cap: RM 2.4 billion
2 billion (current shares) + 200k (new shares) x RM 1.10 (IPO value)
2.2 billion x RM 1.10 = RM 2.4 billion
Price Earning (PE) ratio: 64
Market value per share/ Earnings per share
RM1.10/ RM 0.017
Earning per share formula:
Net profit 2020 / total shares
(RM 37.98 million or RM0.037 billion) / (2 billion shares + 200k new shares)
So this means that the company CTOS Digital Berhad is valued 64 times higher for this IPO compared to the current stock value.
It’s normal if the PE is too high, it’s not good either because it looks like the stock is overvalued or overvalued. But for this CTOS company, if it is expected that in the future his sales and profits will increase many times, then the public will still be willing to pay the current 64 times the value of the IPO shares.
Let’s look at the company’s financial performance:
LATEST FINANCIAL PERFORMANCE
Sales 1st Quarter 2021 = RM42.3 million
Sales 1st Quarter 2020 = RM34.1 million
So sales went up 24.1%
Net profit 1st Quarter 2021 = RM16.4 million
Net profit 1st Quarter 2020 = RM 9.5 mi
So net profit increased 73%
Then let’s see, what is the purpose of this IPO share sale?
1) RM990 million to be paid to existing shareholders (900 share units)
2) RM155 million to pay the company’s debt/borrowing bank
3) RM59 million allocation for the purchase of strategic companies
4) RM6.1 million to cover cost & fee to list the IPO on Bursa
This means that from the issuance of 200k new shares, the sales proceeds will mostly be used to pay the company’s debt. If you look at it at a glance, it’s not very interesting because the income is mostly to pay off debt and not to grow the company..
But, based on the previous takeover of another company by CTOS, the existing debt can be justified with this reason.
1) July 2019: CTOS takes over Enfo and CTOS Insights
The effect: CTOS has a 26% stake in Experian
2) October 2020: CTOS gets a 20% stake in BOL (Thailand)
3) January 2021: CTOS gets hold of Basis
So, the purchase of large companies like this will usually require a large amount of funds. This purchase also gives CTOS the potential to have more databases for the company and expand the business.
So, it still looks positive for CTOS Digital Berhad’s IPO.
For those who want to apply for the CTOS IPO, they can still apply through maybank2u. The trick is to link the CDS account with the Maybank account first, then you can buy.
IPO closing date: 6/7/2021
Adviser for IPO exercise: Maybank Investment + RHB Investment
Btw, applying for this IPO is based on voting. We are fortunate enough to get the shares. If there is no sustenance, the money will be returned to our account. And it should also be noted, the profit or loss from the purchase of these shares is still from our own decision. “Trade at Your Own Risk”
Good luck and good luck.
Greetings guys 🙂
You can also refer to more about the CTOS IPO here:
Isaham’s FB post on CTOS IPO
Sources of The Edge: