Credit Bureau Asia - CGS-CIMB Research 2021-08-06: Initiatives In The Pipeline


Credit Bureau Asia - Initiatives In The Pipeline

  • Credit Bureau Asia declared its inaugural interim dividend of S$0.017 (implying a ~100% dividend payout ratio), ahead of its FY21F-22F guidance of at least 90%.
  • The Credit Bureau Act has come into effect. Winning the sole licence to collect and use FI commercial credit information is a key re-rating catalyst.
  • Reiterate ADD on Credit Bureau Asia. A gradual economic reopening could bolster volumes.

Softer 1H21 results due to slower Non-FI data growth and one-offs

  • Credit Bureau Asia (SGX:TCU) delivered a 1H21 revenue growth of 8.5% to S$22.3m, but missed our expectations by 8%. Adjusting for one-off items (listing expenses, job support scheme grants, disposal of Credit Bureau Malaysia), 1H21 PAT rose 15% y-o-y to S$8.8m, forming 43% of our full-year FY21F forecast. The miss came mainly from a relatively slower pace of revenue growth in the non-FI data business, which expanded 4.9% y-o-y to S$12.6m in 1H21 nonetheless.
  • Earnings growth from the FI data segment rose comparably faster at 13.4% y-o-y to S$9.7m in 1H21, supported by stronger demand for new credit applications and reviews.
  • Credit Bureau Asia declared its inaugural interim dividend of S$0.017 per share, implying a ~100% dividend payout ratio — ahead of management’s ~90% guidance for FY21F-22F. However we cut our dividend estimates for Credit Bureau Asia to S$0.037 in FY21F, in line with our lower earnings estimates.

Sustained volumes and new initiatives to drive stronger 2H21F

  • We expect a stronger 2H21F for Credit Bureau Asia from:
    1. sustained volume growth in bulk risk reviews and new credit applications from its FI data business (higher profit margins), and
    2. new initiatives, such as cross-selling credit information and product development using data from the Moneylenders Credit Bureau, and leveraging on its current data pool to develop analytics solutions.
  • Also, a resurgence in COVID-19 cases across Credit Bureau Asia’s regional markets could sustain bulk risk review volumes from both FIs and non-FIs.

Continuing to forge regional alliances via joint ventures

  • The Credit Bureau Act came into effect in May 21, allowing the Monetary Authority of Singapore to license and supervise credit bureaus in Singapore. To this end, Credit Bureau Asia will apply (by end-2021) for the sole licence to collect and use commercial credit information from FIs.
  • Further, discussions are underway to sign on all four new digital banks in Singapore as members of Credit Bureau Singapore. While providing volume upside, we are cognisant that two of the four new licences issued are digital wholesale banks, which would garner lower (although higher-valued) volumes.
  • Credit Bureau Asia’s Cambodian operations continued to execute well in 1H21, with higher credit report sales. In Myanmar, Credit Bureau Asia has signed up ~30 FIs as bureau members and hopes to be operational by end-FY21F.

Reiterate ADD on Credit Bureau Asia with a lower DCF-based target price

Andrea CHOONG CGS-CIMB Research | Darren ONG CGS-CIMB Research | https://www.cgs-cimb.com 2021-08-06
SGX Stock Analyst Report ADD MAINTAIN ADD 1.43 DOWN 1.530