KUALA LUMPUR (Oct 15): CTOS Digital Bhd (KL:CTOS) reversed course on Thursday as more analysts downgraded the digital services firm following a major cybersecurity incident.
Hong Leong Investment Bank and CIMB Securities both cut their recommendations to ‘hold’ from ‘buy’ and sharply slashed their target prices, joining Kenanga Investment Bank that lowered its rating on Wednesday. All are warning of material impact to earnings from suspension of services.
Restoration of its services “doesn’t mean immediate normalisation,” Hong Leong Investment said, warning that the company faces an even longer road ahead to rebuild confidence among its clients.
Shares of CTOS Digital fell 8% or four sen to 46 sen, wiping out Wednesday’s rebound while hovering near record lows.
The stock has lost about 40% of its value year-to-date and trading below its listing price since 2022 partly due to weaker than expected earnings and a prolonged vacuum at the top management. The company appointed a chief executive in January after more than a year of vacancy.
There are now five ‘hold’, four ‘buy’, and no ‘sell’ calls among analysts tracked by Bloomberg. The average 12-month target price, meanwhile, has fallen to 67 sen.
For CIMB Securities, the prolonged service disruption also has potential longer-term implications for customer retention and cybersecurity costs on top weaker earnings visibility.
Slower transaction volume recovery, potential customer migration to alternative providers and higher cybersecurity spending could weigh on next year’s earnings even as the company has not received indications of contract cancellations, the house added.
On its part, CTOS Digital stated on Oct 13 that the cybersecurity breach is expected to reduce this year’s net profit by RM12 million and revenue by RM16 million. The estimates assume some services remain unavailable until the third week of October.
CTOS Digital first disclosed the cybersecurity incident on Sept 23, saying unauthorised access had occurred in an environment supporting its consumer business.
Bank Negara Malaysia suspended Central Credit Reference Information System — a key database mostly known as CCRIS that collects credit and loan data — disrupting some of CTOS Digital’s credit reporting services, including CTOS Score and other related products.