Introduction

This comprehensive report provides a deep dive analysis of Credit Bureau Asia Ltd (CBA) alongside a thorough peer comparison with several listed companies in the credit bureau and data management space. The report covers detailed performance metrics, financing outcomes, EPS and dividend guidance, balance sheet strength, and ESG initiatives as provided in the research note. It is designed to inform investors about key drivers, catalysts, and risks affecting the stock performance over the next 12 months.

Credit Bureau Asia Ltd: A Comprehensive Analysis

Earnings and Operational Performance

Credit Bureau Asia Ltd reported a 2H24 PATMI of S\$5.4 million, which, although showing a 12% year-on-year increase (and a −6% half-on-half change), missed expectations by 12%. The lower-than-anticipated PATMI primarily stemmed from heightened operating expenses, including performance-related staff bonuses (+8% yoy) and additional business-related costs (+9% yoy) comprising report costs, lease expenses, maintenance, commission expenses, IT support fees, and forex losses. A weaker contribution from joint ventures, particularly with a 22% decline in results from its JVs, further aggravated the earnings miss.

The breakdown in the joint ventures reveals that Cambodia’s contribution in 2H24 was lighter (down 17% yoy) due to increased employee expenses and depreciation, while losses in Myanmar remained stable at S\$0.1 million.

Revenue Growth Across Business Segments

Revenue growth in 2H24 was solid and broad-based with both financial institution (FI) and non-FI segments demonstrating an 8% increase year-on-year. In the FI data business, growth was driven by enquiries for new credit applications and uplift in demand for consumer direct and employment check reports. In the non-FI segment, the expansion was mainly fueled by global customers seeking credit risk management solutions – an offsetting factor against lower revenue from local customers.

Investment Case and Valuation

The report reiterates an Add recommendation on Credit Bureau Asia Ltd with a target price of S\$1.30 (DCF-based, using a WACC of 7% and a terminal growth rate of 1.5%) while the current share price stands at S\$1.18. It is anticipated that improving regional investment sentiment and resurgent regional trade activity will boost credit enquiry volumes. The fundamentals are underpinned by sustainable revenue growth in both FI and non-FI segments.

Despite the excitement around the business driver of increased employment and consumer check reports, pressures on cost factors and volatile contributions from joint ventures remain the key challenges.

Catalysts and Downside Risks

A progressive uptick in business activity among digital banks in Singapore is a critical re-rating catalyst for CBA. However, downside risks include a possible slowdown in trade activity due to global financial market volatility and increased credit bureau licence competition in Singapore. Future potential acquisitions in regional markets may help in offsetting these risks.

Financial Summary and Operational Metrics

Detailed financial analysis shows revenue growth trajectory from S\$54.17 million in Dec-23A to a projected S\$76.47 million by Dec-27F. Operating EBITDA grows steadily from S\$28.27 million to S\$43.23 million over the same period, complemented by improving net profit and core EPS figures. Core EPS is expected to rise from 0.043 S\$ in Dec-23A to 0.064 S\$ by Dec-27F. The company’s substantial dividend payout, supported by a full-year FY24 DPS of 4 Scts, accentuates its commitment to returning value to shareholders.

Balance Sheet and Cash Flow Analysis

The balance sheet of Credit Bureau Asia Ltd shows a comfortably strong position. With total cash and equivalents increasing from S\$57.34 million (Dec-23A) to a forecast S\$77.44 million by Dec-27F, and shareholder’s equity forecast to reach S\$81.83 million, the company demonstrates robust liquidity and solvency.

The cash flow statement indicates a steady operating cash flow, with EBITDA projected to grow to S\$43.23 million by Dec-27F. With disciplined capex and consistent free cash flow generation to firm and equity, CBA positions itself to support ongoing operational expenses and potential investments as detailed by its management.

Peer Comparisons in the Credit Bureau and Data Services Sector

The report includes an insightful peer comparison featuring established names in the credit bureau and data solutions arena. Competitors reviewed include TransUnion, Equifax Inc., FactSet Research Systems Inc., and Dun & Bradstreet Holdings Inc.

For instance, while Credit Bureau Asia Ltd received an ‘Add’ rating with a target price of S\$1.30 from CGS International Securities, global peers such as TransUnion and Equifax are noted for their market leadership and advanced global network reach. Although TransUnion and Equifax do not have disclosed target price information in this report, various operating and valuation metrics – including FD Core P/E, EV/EBITDA, and dividend yield – reflect healthy long-term market dynamics for the sector.

The peer comparison chart also outlines an aggregate rating distribution with 67.4% of companies receiving an ‘Add’ rating, 22.2% ‘Hold’, and 10.4% ‘Reduce.’ This underscores a market expectation for a robust performance majority in the sector. The comparative metrics such as Gross Interest Cover, ROE, and ROIC further establish a performance benchmark that Credit Bureau Asia Ltd is well-placed to compete with.

ESG Commitments and Regional Expansion

Credit Bureau Asia Ltd’s commitment to ESG (Environmental, Social, and Governance) principles is marked by the establishment of its Infocredit Cares initiative in 2014. The initiative focuses on financial support to students and the improvement of financial literacy, especially in markets like Cambodia. Looking ahead, the company is exploring a joint-venture opportunity in Vietnam to offer analytics, data solutions, and credit reporting services. This strategic move capitalizes on Vietnam’s large unbanked and underbanked population and is anticipated to further diversify and grow the company’s revenue streams.

Final Recommendation and Concluding Thoughts

With a robust balance sheet, growing revenue streams in both FI and non-FI data segments, and a thoughtful focus on cost management despite the PATMI challenges, Credit Bureau Asia Ltd is expected to see a rebound driven by enhanced regional trade activity and emerging opportunities in digital banking. CGS International Securities Singapore Pte. Ltd. reiterates its “Add” recommendation on the stock with a DCF-based target price of S\$1.30, bolstered by improving operating metrics and forward-looking catalysts.

Investors are advised to monitor the cost escalation in joint ventures, the evolving competitive landscape in Singapore’s credit bureau licensing, and the progress on potential acquisitions and regional expansion. This deep-dive analysis provides a solid foundation for evaluating the stock’s total expected return over the next 12 months.

Conclusion

This detailed report on Credit Bureau Asia Ltd delivers a thorough financial, operational, and market outlook for the company. With rigorous peer comparisons and a strategic emphasis on ESG and regional expansion, investors receive a clear and insightful analysis to aid their decision-making process. The “Add” recommendation reflects a positive future outlook largely driven by bottom-line improvements and solid underlying fundamentals.