RHB Investment Bank Bhd (RHB Research) and Maybank Investment Bank Bhd (Maybank IB) have maintained a BUY rating for CTOS Digital Bhd following its stronger performance in the second half of 2024 (2H24).

Both research houses expect CTOS to recover from earlier setbacks in the year, with fourth-quarter (4Q) results expected to cap off a seasonally robust 2H24. This comes on the back of a 9% quarter-on-quarter and 13% year-on-year rebound in 3Q where CTOS reported core profits of RM27.6 million.

As such, RHB Research has set a target price (TP) at RM1.58, indicating a 38% upside, while Maybank IB with a TP of RM1.65.

CTOS's management remains optimistic about its growth potential despite challenges. It has revised its FY25 forecast to a range of RM125-RM130 million from an earlier estimate of RM150-RM160 million, reflecting a more conservative outlook on revenue growth and project timelines in its digital solutions.

Nevertheless, the company is well-positioned within a rapidly expanding digital and credit solutions market in ASEAN, with a penetration rate of 10%-15% and an estimated total addressable market of RM2.7 billion.

Looking ahead, CTOS anticipates a robust finish for FY24, supported by deferred project implementations and growing contributions from associates such as JurisTech and RAM Holdings. Maybank IB noted that 4Q earnings should benefit from stronger associate contributions, including from RAM Holdings and JurisTech, which reported a cumulative pipeline worth RM91 million.

As, CTOS' share price correction has provided an attractive entry point, especially given the company's dominant market position in credit reporting.