KUALA LUMPUR (Jan 31): MIDF Research on Monday (Jan 31) maintained its “buy” call on Bursa Malaysia Bhd at RM6.128 with a lower target price of RM7.45 (from RM8.20) and said the recent share price decline meant that the stock is currently undervalued.

In a note on Monday, the research house said the weakness in trading activities in 4QFY21 may spill over into 1QFY22.

Analyst Imran Yassin Yusof said Bursa’s FY21 earnings declined 6% year-on-year (y-o-y), adding that this was “a shade below our expectation coming at 93.3% of our FY21 estimate”.

He said Bursa’s FY21 revenue fell 3.9% y-o-y, driven by lower securities trading revenue which fell 11.2% y-o-y.

“Total average daily value (ADV) of on-market transactions (OMT) declined in FY21, which fell 15.9% y-o-y to RM3.55 billion.

“This was due to lower trades by domestic institutional investors which contracted 20.4% y-o-y to RM1.94 billion. This was followed by value of trades from retail investors which saw lower ADV OMT of 16.1% y-o-y to RM1.33 billion,” he said.  

On the other hand, Imran noted that revenue was supported by more fund-raising activities, with 30 new listings on the local bourse in FY21.

“This led to total funds raised (both in the primary and secondary markets) to grow 70% y-o-y to RM17 billion. As a result, revenue from listing and issuer services grew 24.3% y-o-y to RM70.9 billion,” he said.

He noted that the weakness in trading activities in 4QFY21 may spill over into 1QFY22 due to volatility caused by the US Federal Reserve’s “hawkish stance” and geopolitical issues.

“However, we expect that trading activities will rebound once the dust settles. Furthermore, we have seen interest from foreign investors starting to return. Based on the funds flows from Bursa, foreign investors recorded net inflow of RM463.5 million in January this year.

“Although it is still early days, FY22 could potentially see a reverse from prior years. We believe the recent share price decline means that the stock is undervalued,” he said.

Imran reiterated his “buy” call on the counter, with a lowered target price of RM7.45 (previously RM8.20).

“We peg FY22 earnings per share to lower price-to-earnings ratio of 20x (from 22x) to account for the rising volatility,” he added.

At 10.19am, Bursa gained 12 sen or 1.94% to RM6.30, valuing it at RM5.1 billion.