Excerpts from CGS CIMB report

Credit Bureau Asia Ltd (SGX: TCU)

• Credit Bureau Asia two DWBs launched in Singapore – kicking off one of CBA’s new prospective revenue streams. CBS’s member bureaus will rise from 31 to 36.
• We think that DFBs could add at least c.3-6% in incremental revenue by endFY26F depending on the banks’ ramp-up. DWBs will augment this further.

Reiterate Add. Growth prospects abound, though earnings accretion may take time. Meanwhile, ASEAN border re-openings will support growth.

GLDB and ANEXT – 2 new DWBs launched in Singapore

Two of the four digital banking licence awardees in Singapore (Green Link Digital Bank [GLDB] by Greenland Financial’s consortium and ANEXT Bank by Ant Group) launched their digital wholesale banking (DWB) businesses in the past week.

GLDB will focus on integrating technological solutions to supply chain financing for SMEs, while ANEXT aims to serve local and regional micro and SMEs engaging in cross-border operations for global expansion.

Including the two digital full banks (DFBs, Grab and Singtel’s GXS Bank and Sea Limited’s digital bank) and Trust Bank (rebranded from SC Digital Bank), Credit Bureau Asia (CBA) count of bureau members will rise to 36.

Credit Bureau Asia earnings upside will depend on products and value proposition

As Credit Bureau Asia Singapore drives the lion’s share of CBA’s revenues (c.44% of FY21 revenue), additional bureau members offer scope for incremental revenue contribution.

This is based on the volume of credit enquiries from these banks and portfolio risk reviews the banks undertake.

That said, we highlight that most of the incremental income will stem from DFBs given their focus on retail banking (potential transaction volumes in the millions) vs. DWBs (volumes in hundred-thousands).

Further, the ramp-up of operations will depend on the types of products offered (e.g. credit cards garner larger volumes compared to unsecured retail loans or mortgages) and value proposition (e.g. rates, user experience).

Credit cards from DFBs could add c.3-6% revenue upside in FY26F

Our scenario analysis for incremental revenue to CBA from DFBs for new credit enquiries assumes that the DFBs augment the number of credit and charge card holders in the industry by c.2-10% by lending to the unbanked and underserved segments.

This could raise CBA’s revenue by c.3-6% by end-FY26F (Figure 1). Credit enquiries for other retail products and data packets to DWBs (priced at higher rates) could lead to further revenue streams for CBA.

We expect earnings visibility for CBA to emerge only in the medium term once the banks firm up their growth strategies.

Valuation/Recommendation

Reiterate Add with DCF-based TP of S$1.20. Growth prospects abound for CBA (licencing process to collect and use commercial credit information from FIs, regulation of buy-now -pay-later providers by MAS), but these initiatives will likely take time to materialise.

CBA remains on the lookout for synergistic M&A.

Downside risks: rising inflation, suppressing credit demand (and therefore enquiries).

You can find the full report here and the company website here