Thursday 28 Mar 2024
By
main news image

KUALA LUMPUR (April 29): Analysts on Friday (April 29) maintained Bursa Malaysia Bhd’s earnings forecasts as its net profit for the first quarter ended March 31, 2022 (1QFY22) was deemed broadly in line, but some see its valuation had run ahead.

Bursa Malaysia on Thursday announced that its net profit for 1QFY22 dropped 44.01% to RM67.97 million from RM121.39 million a year earlier, due to lower operating revenue primarily caused by a decline in securities trading revenue.

On Friday, Maybank Investment Bank analyst Wong Chew Hann said Bursa Malaysia’s 1QFY22 results were in line at 29% of house and 27% of street’s estimates.  

“We make no change to our earnings forecasts, expecting lower FY22 (ended Dec 31, 2022) net profit by 34% year-on-year as equity average daily volume (ADV) normalises towards pre-pandemic level,” she said.

She, however, downgraded Bursa Malaysia to "sell" from "hold" as catalysts are lacking with growth, policy risks and politics impacting sentiment and trading activities.

She noted that Bursa Malaysia’s current share price implies RM2.8 billion equity ADV for 2022 versus year-to-date’s RM2.6 billion.

“Our unchanged target price (TP) of RM6.38 is based on a 22 times price earnings ratio (PER) (10-year mean),” she said.

At the time of writing, Bursa Malaysia fell 14 sen or 2.01% to RM6.81, valuing the group at RM5.61 billion. Year to date, the counter has gained 5.42%.

Meanwhile, KAF Research analyst Izzul Hakim Abdul Molob said in a note that he downgraded Bursa Malaysia from "buy" to "hold", with an unchanged TP of RM6.90.

“Following the recent run-up in its share price, we believe that Bursa Malaysia is now fairly valued, as it is already trading above its five-year PER mean with a potential earnings contraction of about 26% year-on-year,” he said.

According to him, Bursa Malaysia’s 1QFY22 earnings contracted by 44% year-on-year due to significant reduction in ADV, velocity, and retail participations.

“Earnings were, however, in line with our and market expectations. We maintain our ADV target for FY22 at RM2.4 billion, as year-to-date April’s ADV is on track with our expectation,” he said.

Despite the downgrade, he expects Bursa Malaysia’s net cash position to remain strong, with a stable dividend payout at more than 90% of its earnings.

UOBKayHian analyst Wee Teck Keong also said in a note that he believes the positive effects of the 15th general election (GE15) have been largely priced into Bursa Malaysia’s current valuations.

“The stock’s current valuation of 22.5 times of 2022 price to earnings (PE) is close to its 10-year historical mean of 23 times, while our earnings estimate for 2022 is already based on ADV assumptions (RM2.4 billion) that is 20% above its pre-Covid-19 10-year average level of RM2 billion to factor in the positive impact of GE15 to ADV,” he said.

This has prompted him to maintain his "hold" recommendation on Bursa Malaysia and TP of RM6.40.

“Its 1QFY22 earnings were broadly in line. Given the high base effect of 2021 ADV, we expect Bursa Malaysia’s earnings to decline 30% year-on-year in 2022 despite the benefit of the GE on ADV,” he said.

Likewise, CGS-CIMB analyst Winson Ng said in a note that he retains his "reduce" call on Bursa Malaysia as its 2023 PE of 22.2 times is above its five-year average of 21.1 times.

According to him, an expected decline in equity average daily trading value (ADTV) in the coming quarters would be the potential de-rating catalyst for the stock.

“We retain our FY22 to FY24 forecast earnings per share forecasts and TP of RM6.59, which is pegged to its five-year average PE of 21.1 times,” he said.

Although Bursa Malaysia’s 1QFY22 net profit accounted for 31.6% of his full-year forecast, he deemed that as in line, in anticipation of weaker quarters ahead.

“We expect Bursa Malaysia’s 2QFY22 net profit to decline quarter-on-quarter due to our anticipated drop in equity ADTV and higher taxation. With this, we estimate 2QFY22 net profit to decline by 20% to 30% year-on-year, from the much higher 2QFY21 net profit of RM89 million,” he said.

Hong Leong Investment Bank analyst Jeremy Goh, on the other hand, said in a note that he maintained a "buy" call on Bursa Malaysia with a TP of RM7.95, as he continued to like Bursa Malaysia as an apolitical election play, riding on the potential ADV upside.

“Bursa Malaysia reported 1QFY22 profit after tax and minority interests (PATMI) of RM68 million, this was within expectations at 27% of ours and consensus full-year forecast.

“While the results were seemingly unexciting, we continue to advocate the view that Bursa is a beneficiary of GE15 — past GEs have shown a positive impact to ADV on a year on year and month on month basis,” he said.

With increasing probability of an early GE15 (in August to October), he believes investors will eventually start angling on Bursa Malaysia.

Edited BySurin Murugiah
      Print
      Text Size
      Share