Various research houses have given mixed analyses of CTOS Digital Bhd's performance and outlook, ranging from BUY and HOLD.

RHB Investment Bank Bhd (RHB Research) maintains a BUY rating on the company with a target price (TP) of RM1.49, reflecting a 42% upside from the current market price of RM1.05. CIMB Investment Bank Bhd (CIMB Securities), however, has revised its TP down to RM1.30 from RM1.45, keeping its BUY rating but acknowledging a moderating growth outlook. Hong Leong Investment Bank Bhd (HLIB), on the other hand, has downgraded its recommendation to HOLD from BUY and lowered its TP to RM1.10, citing softer-than-expected results and recalibrated expectations.

For the first quarter of FY25, CTOS reported a core net profit decline of 31% year-on-year (YoY), with revenue growing by 6.3% to RM76.1 million. Despite the revenue growth, the company's profit was impacted by higher sales, marketing, and administrative expenses, as well as a dip in gross profit margin (GPM) due to a less favourable sales mix, particularly in its Direct-to-Consumer (DTC) and International segments.

The company attributed a significant portion of the cost increase to a 40-50 headcount expansion to support its domestic and international growth initiatives, with a portion of the costs being non-recurring. A dividend of 0.44 sen per share was declared, slightly lower than the previous year's 0.64 sen.

Despite the weaker 1Q25 performance, CTOS maintains its growth outlook for FY25, with a strong pipeline of projects and demand for credit-related solutions across the ASEAN region. The company remains confident in its medium-term growth trajectory, with efforts to optimise costs and improve earnings in the subsequent quarters.

RHB Research highlighted CTOS's unique position in the recession-proof credit reporting sector, while CIMB Securities sees potential in the International division, which continues to benefit from strong demand for alternative credit scoring models. HLIB, however, revised its earnings forecasts for FY25-FY26 down by 14-15% due to expected revenue softness, lower margins, and higher operational expenses. It also flagged a potential "profit cliff" after FY27 when CTOS's pioneer status tax exemption is expected to expire.

The changes in analyst recommendations reflect differing views on CTOS's growth prospects, with RHB Research maintaining a bullish stance on its long-term potential, CIMB Securities adjusting its outlook based on market challenges, and HLIB cautioning about risks to profitability in the coming years.