This article first appeared in The Edge Financial Daily on May 2, 2019

Bursa Malaysia Bhd
(April 30, RM6.75)
Downgrade to sell with a lower target price of RM5.40: Bursa saw a weak quarter in first quarter of financial year 2019 (1QFY19), as net profit of RM46.9 million (-26.5% year-on-year [y-o-y]; -9.6% quarter-on-quarter [q-o-q]), was below Affin’s and consensus estimates, respectively.

The bulk of Bursa’s operating profits (89.5%) came from the securities market division which saw profits declining 22.9% y-o-y and 5.7% q-o-q as a result of a reversal in trade values. This was reflected by the 1QFY19 average daily value of RM2.4 billion (-17.7% y-o-y; +1.5% q-o-q).

Meanwhile, the derivatives division saw operating profit down 25.5% y-o-y and 13.3% q-o-q arising from lower guarantee fees as well as contraction in trading volumes (-15.2% y-o-y; -24.2% q-o-q).

The implementation of a shorter settlement date for the equity market effective April 29, 2019 is expected to result in significantly lower trade volumes in the near term, though overall, the move will lower financial market risks in general. — Affin Hwang Capital Research, April 30