Expect a turnaround in Bursa Malaysia’s net earnings after a dismal FY2022

LOCAL bourse operator Bursa Malaysia Bhd can expect a turnaround in its net earnings from a decline of 36.3% in FY2022 to an expansion of 5.5% in FY2023F, thanks to the absence of the one-off Cukai Makmur (prosperity tax) that was imposed in FY2022.

Revenue-wise, CGS-CIMB Research is further projecting a decent growth of 3.6% in equity income on the back of a 4.8% increase in equity average daily trading value (ADTV) and a 5.7% growth in derivative income during FY2023F.

“During its conference call on Jan 31, Bursa unveiled its financial KPIs (key performance indicators) for FY2023F which are in line with our expectations,” revealed analyst Winson Ng in a results review.

“These include pre-tax profit of RM295 mil-RM362 mil (vs our forecast of RM318.3 mil) and 5-7% growth in non-trading revenue (vs our forecast of 6.5%).”

Bursa Malaysia’s 4Q 2022 net profit of RM49 mil was 2.2% lower than the RM50.6 mil estimated earlier by CGS-CIMB Research as its revenue for the period under review of RM145.07 mil was 2.7% below the research house’s estimate.

A 23.6% year-on-year (yoy) decline in 4Q 2022 equity ADTV caused a 27.1% yoy drop in 4Q 2022 equity income, resulting in its 4Q 2022 revenue plummeting by 11.8% yoy and 4Q 2022 net profit dwindling by 24.6% yoy.

On a quarter-on-quarter (qoq) basis, Bursa Malaysia’s 4Q 2022 net profit declined by a narrow 2.2%, dented by higher expenses (+9.1% qoq for operating costs and +7.2% qoq for depreciation).

All-in-all, CGS-CIMB Research reiterated its “hold” rating on Bursa Malaysia with an unchanged target price of RM6.60 as it expects the local bourse’s FY2023F net profit growth would have been priced in.

“The stock price should be supported by a decent dividend yield of 3.9% for FY2023F,” projected the research house. “The upside risk is stronger-than-expected recovery in FY2023F equity ADTV growth while the downside risk is a further decline in equity ADTV in 2023.”

Hong Leong Investment Bank (HLIB) Research is also hopeful for a modest reprieve in Bursa Malaysia’s FY2023 financial performance as its ADTV has never declined for more than two consecutive years.

“Granted, January’s ADTV of RM2 bil is short of our FY2023 target but we are still in the early days,” observed head of research Jeremy Goh. “While the rising probability of a US recession and its contagion could dampen investor sentiment, we reckon that China’s re-opening will offer some cushioning effect to this.”

As a whole, HLIB Research maintained its “hold” rating on Buraa Malaysia with an unchanged target price of RM6.43.

At 9.55am, Bursa was up 1 sen or 0.15% to RM6.72 with 414,700 shares traded, thus valuing the stock market operator at RM5.44 bil. – Feb 2, 2023

 

Main photo credit: The Malaysian Reserve

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