CTOS’ Juris exit a prudent capital move

PETALING JAYA: CTOS Digital Bhd’s decision to begin exiting its investment in Juris Technologies reflects a disciplined capital allocation strategy rather than a loss of confidence in the financial technology firm, analysts say, as the credit reporting group seeks to unlock shareholder value and sharpen its focus on higher growth intelligence and analytics businesses.

Following a briefing with CTOS’ management, Hong Leong Investment Bank (HLIB) Research said the company guided that the downside from the stake sale is limited, as CTOS has secured a call option allowing it to repurchase the 10% stake at the same RM500mil valuation if the planned exit of its remaining holding does not materialise within the agreed timeframe.

To recap, CTOS announced the disposal of a 10% stake in Juris, a 49%-owned associate company, to its founder and major shareholder Natsoft for a cash consideration of RM50mil, implying a valuation of 17 times financial year 2025 (FY25) price-to-earnings.

The transaction is expected to complete by July, following which CTOS will retain the remaining 39% stake for a potential secondphase exit via an initial public offering or strategic sale within 18 months, with a further six-month extension.

According to HLIB Research, management highlighted that although Juris delivered strong financial returns, with profit growing from RM18mil in 2021 to RM30mil in 2025 (representing a 14% compound annual growth rateover four years), the anticipated strategic synergies with CTOS’ data and analytics business were limited due to differences in their business models.

“In our view, this reinforces CTOS’ disciplined capital allocation approach, while its share buybacks should provide some earnings per share support through a reduced share base and the special dividend of RM24.5mil, which is slated by October this year,” it said in a report.

HLIB Research, which maintained a “buy” call and 89 sen target price on the stock, said the group’s earnings transition will likely be gradual.

“Management maintained its three-year targets of 10% to 12% revenue compound annual growth, a 16% to 18% return on equity, and a 60% to 70% dividend payout ratio, despite potential earnings headwinds from lower contributions from Juris and the expiry of tax incentives from FY27 onwards.”

For FY26, the earnings impact is expected to be minimal, as the RM1.6mil disposal gain is expected to largely offset the lower associate contribution, while the group’s core operations remain on track to deliver double-digit growth.

However, it expects the earnings transition to be more challenging from FY27, as the reduced Juris contribution and higher tax expenses could create a more noticeable drag on bottomline.