CTOS Digital falls to a new low after analyst downgrades

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CTOS Digital falls to a new low

Highlights

Hong Leong Investment Bank and CIMB Securities downgraded CTOS Digital to 'hold' from 'buy', while significantly cutting their target prices.
The cybersecurity breach is expected to reduce CTOS Digital's net profit by RM12 million and revenue by RM16 million this year.
CTOS Digital's average 12-month target price has now fallen to 67 sen, with five 'hold' recommendations, four 'buy' recommendations, and no 'sell' recommendations.

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

Downgrades and financial impact

The Edge Malaysia reported that Hong Leong Investment Bank and CIMB Securities each downgraded their recommendations to "hold" from "buy", while significantly cutting their target prices, joining Kenanga Investment Bank, which downgraded the stock on Wednesday. All three firms warned that the service suspension would have a material impact on the company's earnings.

Hong Leong Investment said the restoration of services does not mean an immediate return to normal, noting that CTOS Digital faces a longer path to rebuilding customer confidence. For CIMB Securities, prolonged service disruptions could also have longer-term implications for customer retention and cybersecurity costs, in addition to weaker earnings visibility.

CIMB Securities added that a slower recovery in transaction volumes, the possibility of customers migrating to alternative providers and higher cybersecurity spending could weigh on earnings next year, although the company has not received any indication of contract cancellations. So far, there are five "hold" recommendations, four "buy" recommendations and no "sell" recommendations among analysts tracked by Bloomberg, while the average 12-month target price has fallen to 67 sen.

On 13 Oct, CTOS Digital said the cybersecurity breach is expected to reduce this year's net profit by RM12 million and revenue by RM16 million. The estimate assumes that some services remain unavailable until the third week of October.

In our previous article on the estimated financial impact of CTOS Digital's cybersecurity incident, the company expected FY2026 profit after tax to decline by RM12 million and revenue to decrease by RM16 million if some services remained disrupted until the third week of October. We also highlighted that each additional week of disruption could continue to weigh on profit and revenue, although at that time some analysts still maintained a relatively positive view of the stock.

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