KUALA LUMPUR (July 24): CIMB Securities has cut its earnings forecast for CTOS Digital Bhd (KL:CTOS) after the group's first half ended June 30, 2026 (1HFY2026) results came in below expectations, with earnings reaching less than half of the research house’s estimate.
"We cut our FY2026-2028F EPS (earnings per share) by 7-11% but expect CTOS to return to positive EPS growth in FY2026F, supported by improved efficiency and stronger overseas contributions," the house said in a note on Friday.
CIMB Securities' downward revision reflects slower-than-expected growth in the financial institution and corporate (FIC) and commercial segments, and the downside following the proposed Juris Technologies Sdn Bhd stake disposal.
For the three months ended June 30, 2026 (2QFY2026), CTOS posted a 14.5% quarter-on-quarter growth in core net profit.
The house attributes this to an increase in associated contributions to RM8.4 million, compared to RM6.3 million in 1QFY2026, and improved cost discipline during the quarter.
“In addition, the share of profit from associates increased to RM14.7 million in 1H2026 from RM11.7 million in 1H2025, driven by higher contributions from Juris and stable earnings from RAM following the adoption of equity accounting. As a result, net profit rose 18.9% year-on-year,” it added.
Meanwhile, CIMB Securities expects CTOS to allocate 49% of the proceeds from the disposal of Juris to a potential special dividend amounting to up to 1.07 sen/share (1.6% dividend yield).
“The group is exploring options to fully realise the value of its investment, which may include further stake sales to third parties and/or a potential listing of Juris within 12-18 months following completion of the first phase, expected by end-July 2026,” it said.
However, the research house highlighted the potential downsides of the divestment, saying that it could reduce FY2026 net profit by an estimated 1.5%.
In a separate note, HLIB Research defended the group's decision, stating that “CTOS’ Juris monetisation reflects a disciplined capital allocation move, unlocking value while retaining upside through its remaining stake”.
Other risks identified by the house include slower sales conversion in the FIC segment, delays in product launches, data security breaches, and adverse regulatory changes.
Nevertheless, HLIB Research still maintained its confidence in CTOS, noting that potential upsides include stronger adoption of digital solutions among small and medium enterprises and consumers, cross-selling opportunities in Southeast Asia, disciplined cost management, and potential special dividends from successful non-core asset disposal.
CIMB Securities maintained its ‘buy’ call but lowered its target price (TP) for the stock to 90 sen, from RM1, in line with the reduction in earnings forecast.
Meanwhile, HLIB Research kept its 'buy' recommendation for CTOS, with a TP of 89 sen.
At Friday's midday break, CTOS gained half a sen or 0.7% to 69 sen, valuing the group at RM1.57 billion.