CTOS Digital faces higher risks as Kenanga downgrades stock recommendation

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CTOS Digital faces risks

Highlights

Kenanga Research downgraded CTOS Digital to 'market perform' and cut its target price to 48 sen from 83 sen following the 23 Sept 2026 cybersecurity incident.
The service disruption affects around 35% of weekly revenue, with a potential RM22 million impact on 2026 PATAMI if recovery only occurs at the end of December 2026.
RHB Research maintained its 'buy' recommendation, cut its target price to RM1.06, and forecasts RM373 million in revenue for 2027 assuming a swift recovery.

This article was translated from the original. Read the original version by our correspondent here.

Earnings forecasts pressured by service disruption

As reported by The Edge Malaysia, Kenanga Research downgraded CTOS Digital to "market perform" from "outperform" following the cybersecurity incident disclosed on 23 Sept 2026, citing rising operational, regulatory and reputational risks.

The research firm said the disruption affects around 35% of the group's weekly revenue, comprising about 55% of revenue from the financial institutions and corporate segment, 10% of commercial revenue, and all consumer revenue, while international revenue remains unaffected.

Kenanga said that if services resume by the third week of October 2026 with a 30-day recovery period, CTOS guides for a revenue impact of around RM16 million for financial year 2026 and an RM12 million impact on PATAMI. However, with two of four independent reviews still incomplete, Kenanga adopts a more conservative assumption that services will remain suspended until the end of December 2026, raising the impact on financial year 2026 PATAMI to RM22 million and carrying a RM3 million recovery drag into the first quarter of 2027.

As a result, Kenanga cut its core PATAMI forecasts by 22.6% for financial year 2026 and 3.5% for financial year 2027, while lowering its discounted cash flow-based target price to 48 sen from 83 sen. Nevertheless, the firm still views the incident as a temporary disruption rather than a structural deterioration, with long-term growth drivers such as the Consumer Credit Act 2025, demand from digital banks and the potential monetisation of its associate stake remaining intact.

Recovery expectations and market reaction

Kenanga expects CTOS shares to trade sideways until there is greater clarity on the timing of service resumption and its ability to retain customers. Key risks being monitored include a longer disruption period, regulatory penalties, weaker loan demand and unfavourable regulatory changes.

Meanwhile, RHB Research maintained its "buy" recommendation on CTOS, believing that the company can recover strongly once its systems are back online. The firm believes credit reporting agencies remain essential to the financial ecosystem, and a recovery could take place after the independent assessments are completed under Bank Negara Malaysia requirements and operations resume.

RHB also expects 2027 earnings to remain unaffected, based on the assumption of a swift recovery, forecasting revenue of RM373 million for 2027 and RM400 million for 2028, compared with its RM332 million forecast for 2026. However, the firm's target price was cut to RM1.06 from RM1.10 previously.

The research firm estimates that the service suspension has constrained new customer onboarding and resulted in losses of up to RM12 million, with each additional week of service shutdown adding around RM1.3 million in costs. According to Bloomberg, CTOS shares plunged to an all-time low of 47.5 sen on Wednesday, but RHB described the sell-off as excessive and the incident as isolated.

In our previous article on the estimated financial impact of the CTOS Digital cybersecurity incident, the company expected FY2026 to be affected by a reduction in profit after tax of around RM12 million and a RM16 million revenue decline if some services remained disrupted until the third week of October. We also highlighted pressure on the share price to record lows and how most analysts remained positive despite continued focus on recovery uncertainty and weekly disruption costs.

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