What You Need to Know about Credit Bureau Asia Limited IPO

Right after the listing of NanoFilm Technologies International Limited on 30 October 2020, Credit Bureau Asia Limited (“CBA”) is gearing up its listing on the Mainboard of Singapore Exchange this year.

CBA has lodged a preliminary prospectus on 17 November 2020 with the Monetary Authority of Singapore.

In this article, we will be looking at some of the key highlights for this upcoming Mainboard IPO.

Corporate Profile for CBA

CBA is a leading player in the credit and risk information solutions market in Southeast Asia, providing credit and risk information solutions to an extensive client base of banks, financial institutions, multinational corporations, telecommunication companies, government bodies and public agencies, local enterprises and individuals across Singapore, Malaysia, Cambodia and Myanmar.

CBA’s business is split into two core segments:

• Financial institution data business (“FI Data Business”) and

• Non-financial institution data business (“Non-FI Data Business”), covering both consumer and commercial credit risk information.

FI Data Business – CBA has established credit bureaus in Singapore, Cambodia and Myanmar through joint ventures with local and international partners.

Depending on the territory involved, the Credit Bureaus operate to provide subscribing members, mainly banks and financial institutions, with access to credit information on individual consumers credit reports or registered business entities credit reports.

Non-FI Data Business – CBA has established joint venture partnerships with Dun & Bradstreet and operate through Dun & Bradstreet (Singapore) and Dun & Bradstreet Malaysia to provide customers with a wide range of business information and risk management services.

This is done using data sourced from a variety of publicly accessible registries and the D&B Worldwide Network as well as information contributed by businesses who subscribe to CBA’s payment bureau services.

The picture above shows an example of how Credit Bureau Asia provides the credit report to customers online for a small fee.

Management Team

Mr. Kevin Koo is the founder, Executive Chairman and CEO of CBA. Since the establishment of CBA in Singapore in 1993, he has over 25 years of experience in the credit information industry and has been instrumental to the success and expansion of CBA over the past 27 years.

Prior to venturing into the credit and risk information industry, Mr. Koo graduated with a degree from the Robert Schumann University of Music Düsseldorf, Germany in 1986. He was also awarded the Deutscher Akademischer Austausch Dienst Scholarship by the Public Service Commission in 1981.

Mr. William Lim is one of the Executive Director of CBA. Mr. Lim has been appointed as the managing director of Infocredit Holdings Pte. Ltd ("IHPL") since 2001. He has close to 20 years of experience in the credit information industry and is responsible for executing the strategic direction and expansion plans for the Group.

Mr. Lim is also involved in the successful expansion and establishment of the Group’s business presence in Singapore, Malaysia, Cambodia and Myanmar to date. He also oversees the business operations of the Group as a whole, including aspects such as operations, legal and regulatory, and information technology.

Historical Financial Performance

For 1H FY2020, CBA’s revenue came in at S$20.5 million, which is an increase of 4.4% year-on-year. The rise in revenue can be seen from a higher revenue contribution both FI and Non-FI Data Business.

For the FI Data Business, revenue increased by S$0.1 million or 1.6% from S$8.4 million in 1H FY2019 to S$8.5 million in 1H FY2020. This was due to the increase in quantity of bulk review reports sold as a result of financial institutions increasing the frequency of periodic review during a period of heightened credit risk. This was partially offset by the lower quantity of new credit application reports sold to bureau members as consumer credit activity declined during the period.

For the Non-FI Data Business, revenue increased by S$0.7 million or 6.5% from S$11.3 million in 1H FY2019 to S$12.0 million in 1H FY2020. This was due to the revenue contribution from its global credit risk management solutions and Singapore Commercial Credit Bureau and other bureaus segment while partially being offset by its sales and marketing solutions, receivables management services segment.

Dividend Policy

CBA does not have any fixed dividend policy. The declaration and payment of future dividends may be recommended by CBA's Board at its discretion, after considering several factors such as the level of cash and reserves, expected financial performance, business prospects, capital requirements and surplus and general financial condition.

Currently, CBA’s Board intends to recommend dividend payout of at least 90.0% of CBA’s net profit after tax attributable to Shareholders for FY2021 and FY2022. Based on an EPS of 3.49 cents in FY2019, CBA's DPS comes up to 3.14 cents based on a 90% dividend payout.

Cornerstone Investors

For this upcoming IPO, each of the Cornerstone Investors has entered into a cornerstone subscription agreement with CBA. They will subscribe an aggregate of 28,000,000 new Shares at the Offering Price.

The Cornerstone Investors are:

• Aberdeen Standard Investment (Asia) Limited

• Affin Hwang Asset Management Berhad

• EastSpring Investments (Singapore) Limited

• Tokyo Shoko Research, Limited

Growth Prospects

There are multiple growth opportunities for CBA to capitalize on especially for its Singapore core market and the new markets – Cambodia and Myanmar.

Singapore

Apart from expanding membership to other credit providers, CBA is preparing to provide corporate credit reporting through CBS under the commercial bureau operator licence which the Group intends to apply for pursuant to the upcoming commencement of the Credit Bureau Act.

CBA is also targeting to launch the user-experience and website interface enhancement for CBS in the first half of 2021 which will allow individual consumers to access real-time credit data comparisons against other similar consumers.

For Non-FI Data Business, CBA intends to expand and increase the market penetration of their risk diligence solutions products and services offerings in Singapore Commercial Credit Bureau platform.

Cambodia

In Cambodia, CBA plans to diversify and introduce additional product and service offerings in tandem with the growth of Cambodia’s GDP along with its credit industry and rate of credit penetration.

This includes know-your-customer checks, employment verification, fraud detection and prevention, and identity verification for the purposes of customer and risk due diligence.

Myanmar

CBA’s operations in Myanmar have recently commenced in the fourth quarter of 2020 and the Group intends to replicate the growth strategy used in Singapore and Cambodia on its Myanmar’s segment.

For a start, CBA intends to introduce credit reports and monitoring services to licensed financial institutions. Over the next two years, CBA aims to widen the membership and product and service offerings to include scores and data analytics reports.

Expanding into new markets

CBA is continuously exploring opportunities to expand to other territories in the ASEAN region and may use proceeds from the Offering to fund such expansions. CBA also have right of first refusals in respect of certain credit bureau businesses in Indonesia.

Advancing technological capabilities

For the FI Data Business, CBA plans to introduce a “Generation 3” credit score in their credit reports in the second half of 2021, which will use additional data elements to enhance the robustness and predictiveness of the score.

For the Non-FI Data Business, CBA is developing a new score for its Singapore Commercial Credit Bureau platform, which CBA plans to introduce by the end of 2021. This new score will leverage on either a Financial Stress Score, or utilises artificial intelligence to generate the equivalent score.

Conclusion

The upcoming IPO of CBA has resulted in strong institutional demand and CBA believes it has strong growth prospects with the impending issuance of digital banking licenses and the upcoming commencement of the Credit Bureau Act in Singapore.

Commenting on the lodgement, Mr. Kevin Koo, Executive Chairman and CEO of CBA said:

“We hope investors will appreciate our unique, robust and highly cash generative business model in good and unprecedented times. We are a home-grown Singapore company, and our IPO will help to strengthen our position in the region and beyond."

CIMB Bank Berhad, Singapore Branch is the issue manager for the IPO and CGS-CIMB Securities (Singapore) Pte. Ltd. is the underwriter and placement agent.