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Bursa Malaysia Bhd
(April 20, RM8.79)
Maintain hold with a higher target price (TP) of RM9, from RM8.10 previously:
We estimate that Bursa Malaysia’a first quarter of financial year ending Dec 31, 2015 (1QFY15) net profit will be in line with our forecast.

The 1QFY15 equity trading value saw marginal growth year-on-year (y-o-y) while derivatives trading volume was up 21% y-o-y. Though catalysts are somewhat lacking, we expect the market to remain resilient.

We anticipate the 1QFY15 net profit of RM48 million to RM49 million (our results preview) for Bursa Malaysia (slated to release 1QFY15 results tomorrow), which represents about 24.7% of our 2015 forecast of RM197 million. This is premised on the 1QFY15 estimated revenue of RM131.5 million.

At this juncture, we keep our FY15 to FY17 forecasts unchanged. We expect a relatively flat year for Bursa’s earnings in 2015, an increase of 11% in FY16 estimates (E) and an increase of 7.5% in 2017E.

The Malaysian market has remained resilient, with the January to March 2015 equity trading statistics of Bursa Malaysia showing a marginal growth of 2% quarter-on-quarter and 0.86% y-o-y to RM128.6 billion.

Though the 1QFY15 average daily value of RM2.177 billion is below our 2015 assumption of RM2.22 billion, we keep our forecast unchanged as the ample domestic funds will continue to be supportive of the market, in our view.

On the derivatives front, the 1QFY15 trading momentum has been robust and in line with our expectation, seeing a volume growth of 20.6% y-o-y and 10.6% q-o-q to 3.56 million contracts.

Although we do not foresee strong catalysts to drive the FBM KLCI higher owing to outstanding issues such as uncertainties in the US Federal Reserve rate hike, possibility of a Fitch downgrade and concerns of potential twin deficits (budget and trade), we are of the view that the market will still remain resilient owing to ample domestic funds, shift in investor interest to lower liners and quantitative easing from the eurozone and Japan.

We reiterate our “hold” rating on Bursa, with a revised 12-month TP of RM9, based on an unchanged 22 times price-earnings ratio target (broadly in line with the regional peer average excluding Hong Kong Exchange and Clearing Ltd on 2016E earnings per share of 40.9 sen (from 2015 previously) as we roll over our valuation horizon. — Affin Hwang Capital, April 20

Bursa

This article first appeared in The Edge Financial Daily, on April 21, 2015.

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