DBS Group Research has initiated coverage of Credit Bureau Asia TCU with a ‘hold’ call and $1.02 target price.
CBA, described as a leading player in credit and risk information solutions market (CRIS) in Southeast Asia, is seen to be a beneficiary to Asean’s greater financial inclusion and the rise of digital banks, backed by a defensive business model.
CBA is the dominant provider of data to financial institutions in Singapore. It is also the only provider in Cambodia and Myanmar.
In addition, CBA provides a wide range of business information and risk management solutions to more than 6,000 customers, including banks, MNCs, SMEs and government agencies.
According to analysts Elizabelle Pang and Ling Lee Keng, Asean’s CRIS industry is forecasted to grow at 15% CAGR by 2024.
The growth will be driven by the growth of financing services, credit card penetration, and trade activities as well as the rise of digital banks.
“We believe growing CRIS demand from the region’s emerging markets and the addition of five digital banks to CBA’s scope of membership in 2022 can act as growth drivers,” write Pang and Ling in their April 18 note.
They expect CBA’s revenue and earnings to grow at a steady 8% and 10% CAGR respectively by FY2025.
Besides a steady pace of revenue growth, the analysts believe that CBA runs a defensive business model. “We see resilient demand for CBA’s products across different economic cycles, amid the pandemic.”
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In addition, CBA has a healthy balance sheet and no debt, which can help to ensure sustainable dividend payouts of at least 90% of net profit for investors, the analysts add.
The way Pang and Ling see it, potential catalysts can come from new license wins and strategic expansion plans into markets such as Vietnam and China.
Their $1.02 price target is based on two-stage dividend growth model that assumes sustainable dividend growth rate of 2.0%, which translates into their “hold” call due to limited upside and an implied FY23F dividend yield of 3.5%.
