CTOS Digital Berhad (CTOS MK) faced a challenging 2Q24 with earnings falling short of expectations due to delays in associate contributions and increased costs, according to reports by Maybank Investment Bank (Maybank), RHB Investment Bank (RHB), and Kenanga Investment Bank (Kenanga). Despite strong top-line growth and ongoing regional expansion, the company's earnings were impacted by weaker-than-anticipated performance from its associates, particularly JurisTech, and higher administrative and marketing expenses.

Maybank maintains a BUY recommendation with a revised target price of RM1.65, reflecting a 21% decrease from its previous estimate due to the earnings shortfall and regional consolidation efforts.

RHB also maintains its BUY rating but lowers its target price to RM1.73, indicating a 22% upside potential, based on a forecast adjustment for higher costs and project delays.

Kenanga keeps its OUTPERFORM rating with an unchanged target price of RM2.00, noting that the temporary setbacks are unlikely to deter CTOS's long-term growth trajectory given its dominant market position and rising demand for credit reporting services.

CTOS reported a 23% increase in 2Q24 revenue to RM76.6 million, driven by growth across key accounts, commercial segments, and direct-to-consumer channels. However, core net profit came in at RM25.3 million for the quarter, falling short of expectations and reflecting a 36% achievement of the FY24 forecast.

The company's international segment showed promising growth, with significant new client acquisitions and a 100% telco coverage in Indonesia.

The outlook for the remainder of FY24 is cautious, with anticipated challenges in implementing digital solutions and a focus on consolidating regional operations. Despite this, CTOS remains a leading player in the credit reporting sector with a solid long-term growth potential due to its scalable operations and expanding customer base.