Judging from the robust average daily trading value (ADTV) on the local bourse, Bursa Malaysia Bhd may be on course to churn out yet another profitable quarter.
A bullish CGS-CIMB Research has projected a record net profit of RM128.2 mil for Bursa’s forthcoming 3QFY2020 results – slated for release on Oct 27 – with growth rates of 172.1% year-on-year (yoy) and a staggering 48.7% quarter-on-quarter (qoq) against the previous quarter’s all-time high of RM86.2 mil.
“Based on our assumed 3Q FY2020F net profit, Bursa would have chalked up a net profit of RM279.1 mil for 9MFY2020F,” wrote analyst Winson Ng.
According to the research house, the key earnings driver for Bursa’s 3QFY2020F would be the robust ADTV of the equity market which spiked 200% yoy to an all-time high of RM5.8 bil in the third quarter of this year.
This was 50% higher qoq versus the previous record high of RM3.9 bil in the second quarter of 2020. In addition, the average daily contracts (ADC) for the derivative market also shot up 13.9% yoy in 3QCY2020 according to CGS-CIMB Research’s estimate.
All-in, the research house has upgraded Bursa to “hold” from a “reduce” rating with a higher target price of RM9.10 (from RM8.60 previously) in view of a strong 3QFY20F net profit and improvement in the equity market’s ADTV.
“Despite its (stock price) 15.8% decline from a high of RM10.60 on Aug 8, its current valuation at CY2021F price-to-earnings ratio (P/E) of 31.4 times is still 2 standard deviation points above its five-year historical average of 22.9 times,” opined Ng.
He, however, pointed out that Bursa’s valuation is not attractive on a regional comparison basis given its CY2021F P/E is significantly above Singapore Exchange’s 23.3 times although lower than Hong Kong Exchange’s 34.7 times. – Oct 22, 2020
