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Credit Bureau Asia IPO: 8 Things You Should Know Before Investing

Credit Bureau Asia is in the business of providing information and risk analysis of individuals and corporations. Moving forward, the company itself will also be thoroughly scrutinised by Singapore investors.

Earlier this week, Credit Bureau Asia announced that it had lodged its prospectus for an initial public offering (IPO) of 30,000,000 ordinary shares at an offering price of S$0.93. The offering period will close at 12 pm on 1 December 2020, and the company will be listed on the Singapore Exchange (SGX) on 3 December 2020.

Whether you choose to purchase the offering shares or invest via the secondary market once the company is listed on SGX, here are 8 things you should know about Credit Bureau Asia first.

Read Also: Guide To Understanding Your Credit Report (And Improving Your Credit Score)

#1 Who is Credit Bureau Asia & How Are They Related To Credit Bureau Singapore?

For most of us in Singapore, it’s the subsidiary company – Credit Bureau Singapore – that we would likely recognise and may have bought something from (our own credit report) in the past.

Some of us may mistakenly think that Credit Bureau Singapore is a government-led initiative and may be surprised to hear that the company is privately owned. Let us explain.

Credit Bureau Singapore Pte Ltd (CBS) is a joint venture between the Association of Banks in Singapore (ABS) and an information management firm – Infocredit Holdings Pte Ltd. This has always been known on the CBS website. Because it has lodged its prospectus, we now know the shareholding structure.

Infocredit Holdings Pte Ltd owns 75% of Credit Bureau (Singapore) Pte.Ltd. In turn, Infocredit Holdings Pte Ltd is 51% owned by Credit Bureau Asia Limited, which is the company that will be listed and you can invest in. Besides Singapore, Credit Bureau Asia Limited also has a presence in Cambodia and Myanmar.

Source: Credit Bureau Asia – Product Fact Sheet

#2 Who Are Credit Bureau Asia Shareholders Today?

As explained in point 1, Credit Bureau Asia is a private company and its link to the Association Bank of Singapore (ABS) is that it owns a joint venture company – Credit Bureau Singapore – with ABS.

According to its prospectus, Kevin Koo, the Executive Chairman and CEO of Credit Bureau Asia owns 90% of Credit Bureau Asia total share capital while William Lim, the Executive Director owns the remaining 10%. This is prior to the IPO.

After the IPO, Kevin Koo will own 67.3% of the company’s total share capital.

#3 How Profitable Is Credit Bureau Asia?

Credit Bureau Asia is a stable and profitable company. Its net profit margin before tax in FY2019 is about 46%. For HY2020, it’s more than 50%.

Source: Credit Bureau Asia – Product Fact Sheet

As you can see from the table above, the profit attributed to owners of the company is significantly lower than its profit after tax. This is likely because Credit Bureau Asia operates some of its business via joint ventures with other entities. This, in turn, reduces the profit that can be attributed to the company.

It’s also worth noting that more than 96% of the group’s revenue in FY2017, FY2018, and FY2019 was derived in Singapore. So this is pretty much a Singapore-based company that you are investing in – at least for the time being.

From Credit Bureau Asia’s prospectus:

CBS is a key and material subsidiary and had contributed to 44.1%, 42.4%, 41.7% and 41.6% of our Group’s total revenue in FY2017, FY2018, FY2019 and HY2020 as well as 46.8%, 43.8%, 40.4% and 40.2% of our Group’s profit before tax in FY2017, FY2018, FY2019 and HY2020, respectively.

#4 Risk For The Company

Since it’s in the business of providing credit and risk information, Credit Bureau Asia business model is highly subject to national laws and regulatory oversights specific to the credit reporting industry, particularly in Singapore, where it derives most of its revenue.

According to its prospectus:

In the event that the Credit Bureau Act at any time in the future is updated, revised or enhanced before it comes into force, we may have to alter our existing business or adopt alternative structures in order to comply with such enhanced regulatory requirements. Potential adverse effects include an increase in our operating costs due to enhanced regulatory compliance requirements, reduced or limited demand for our products and services, restrictions in our ability to provide certain products and services to our customers, granting of more licences that may introduce more competitors, any of which could materially and adversely affect our business operations, reputation, revenue and/or financial results.

Also, it’s worth noting that the regulatory license to operate in the first place – particularly in Singapore, is always subject to government approval.

While we have not had any issues in maintaining our regulatory licences and approvals for our existing operations to date, and to the best of our knowledge and belief, we are not aware of any facts or circumstances which would cause such licences and approvals to be suspended, revoked or cancelled as the case may be, or for any applications for, or renewal of, any of these licences and approvals to be rejected by the relevant authorities, there is no assurance that we will be able to obtain licences and approvals as may be required in the future. There is also no assurance that we will be able to obtain such licenses, permits or approvals that may be required for our expansion plans. Our inability to obtain such licences, permits or approvals that may be required may affect our ability to continue to carry on our credit bureau business and materially and adversely affect our business, prospects, results of operations and financial performance.

#5 How Much Will It Be Raising During The IPO?

The company will be offering 30,000,000 shares at an offering price of S$0.93. This means it hopes to raise S$27.9 million from the IPO. Similar to most IPOs, the bulk of the offering shares (28.5 million) will be by way of placement while only 1.5 million shares will be made available by way of the public offer.

At the same time but separate from the Offering, Aberdeen Standard Investments (Asia) Limited, Affin Hwang Asset Management Berhad, Eastspring Investments (Singapore) Limited and Tokyo Shoko Research, Ltd. (collectively, the “Cornerstone Investors”), have signed agreements to subscribe for an aggregate of 28,000,000 new shares (the “Cornerstone Shares”) at the Offering Price. The Cornerstone Shares will in aggregate constitute approximately 12.2% of the total number of 230,390,000 issued shares as at the date of listing.

#6 How Will The Money Be Used?

Of the S$23.6 million that will be due to the company from the IPO, the company has mentioned that

  • 26% will go towards organic growth initiatives,
  • 44% going towards strategic investments, regional expansion and acquisition,
  • 18% will go towards general working capital and
  • 12% for payment of underwriting and placement commission and offering expenses.

# 7 How Much Will Credit Bureau Asia Be Worth Post-IPO?

Based on the Offering Price, the estimated post-IPO market capitalisation of CBA is expected to be approximately S$214.3 million. From a price-to-earning ratio, this puts it at about 30 times.

# 8 Credit Bureau Asia Is Likely A Dividend Play For Singapore Investors

For dividend-seeking investors in Singapore that want to invest beyond REITs and telecommunication companies, Credit Bureau Asia will be an interesting company to consider investing in.

Management has indicated that it intends to recommend dividends of at least 90.0% of net profit after tax attributable to our Shareholders for FY2021 and FY2022. Based on its FY2019 earnings of 3.05 cents per share, this would be a dividend payout of 2.745, which translates to a dividend yield of about 3%.

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