Bulk risk reviews still in demand
- 2H23 PATMI of S$5.1m was above our expectation. CBA declared a final DPS of 2Scts; full-year DPS of 3.7Scts represents an 87% payout ratio.
- The PATMI beat was due to strong uptake of risk review reports in its FI data business. Non-FI segment was steady, with more enquiries from SG and MY.
- Reiterate Add. Improving regional GDP growth should lift its credit enquiry volumes as the elevated interest rate environment sustains bulk risk reviews.
2H23 PATMI beat our expectations from higher review report sales
Credit Bureau Asia’s (CBA) PATMI of S$5.1m in 2H23 (+9% hoh, +16% yoy) was 9% above our expectation. FY23 PATMI was at 104% of our estimate, mainly due to stronger-than-expected revenues from its financial institution (FI) data business which offset the increase in opex due to performance-based staff incentives and (revenue-related) report costs. CBA declared a final DPS of 2Scts for 2H23 (2H22: 1.7Scts). This brought total DPS to 3.7Scts for FY23 (FY22: 3.4Scts), which implies an 87% dividend payout ratio.
Growth for both FI and non-FI business segments in check
CBA’s FI data business was its key growth driver in 2H23, with revenues rising 15% yoy. This was mainly attributable to an increase in review report sales, likely the consequence of FIs being vigilant on the asset quality of their loan portfolios given the elevated interest rate environment. Meanwhile, its non-FI data business revenues rose 7% yoy in 2H23. According to management, most of the non-FI revenue growth in 2H23 came from trade and credit enquiries from Singapore and Malaysia (vs. driven by overseas enquiries in previous periods) as business sentiment picked up. On balance, its total opex rose 10% in FY23, broadly in line with its revenue growth. We expect CBA’s opex growth to continue in FY24F as revenue-related expenses gain momentum in line with regional GDP growth.
Reiterate Add with unchanged DCF-based TP at S$1.20
Although all five new digital bank entrants in Singapore are registered members of Credit Bureau Singapore (CBS), only one of them has recorded activity levels which were comparable to CBS’s other FI members in 2H23. As the other entrants remain in a nascent operational stage, growth in business volumes, and therefore contributions to, CBS will take time to ramp up and stabilise, in our view. CBA’s share of JV earnings improved 28% yoy in 2H23; we highlight that this was largely the result of lower withholding taxes from its operations in Cambodia in 2H23. Cambodia unit Credit Bureau Cambodia (CBC) recorded flattish net profit growth yoy in FY23 as heftier opex (staff and administrative costs, audit expenses) offset revenue growth. Operations in Myanmar under Myanmar Credit Bureau (MMCB) remained at a relative standstill in FY23 given the ongoing political situation. We reiterate Add on CBA as we expect the pick-up in regional trade activity to continue in FY24F, lifting the overall demand for its credit enquiry services. Downside risks to our Add call include a slowdown in trade activity given financial market volatility globally (as US Fed fund rates shift).