HONG Leong Investment Bank (HLIB) Research expects Bursa Malaysia Bhd to chalk up core earnings of RM75.4 mil or a +34.3% year-on-year (yoy) surge in its 1Q FY2024 financial period ended March 31, 2024 on the back of securities average daily value (ADV) of RM2.9 bil (+37% yoy) during the first quarter of 2024.
The research house said this would form 30%/29% of its/consensus full year forecast given (i) seasonally higher other revenue from conferences and exhibitions usually held in first quarter of the year and (ii) tendency for higher operating expense in the second half of the year (typically the fourth quarter).
Bursa is tentatively scheduled to release its 1Q FY2024 results on April 30.
“After two prior lull years of ADV (FY2022/FY22033: RM2.07 bil/RM2.06 bil), this has recovered YTD to a robust RM2.9 bil,” contended head of research Jeremy Goh in a company update.
“Looking ahead, we expect a sequential softening of ADV in 2Q and 3Q 2024 before a rebound in 4Q 2024 to bring the full year sum to RM2.51 bil (+22% yoy).
HLIB Research’s base case for the ADV trajectory is that the US Federal Reserve’s rate pivot will be pushed back to 4Q 2024, hence delaying risk appetite for emerging markets (EMs), including Malaysia.
Moving forward, the research house has raised Bursa Malaysia’s FY2024/FY2025 ADV by +6.6%/+8.1% to RM2.51 bil/RM2.61 bil alongside some tweaks to its cost structure (higher headcount and operating expenditure).
“All in, the FY2024/FY2025 forecast is raised by +3.4%/+6.1%. Our FY2024 PBT (pre-tax profit) of RM348 mil sits above Bursa Malaysia’s KPI (key performance indicators) range of RM293-RM323 mil,” envisages HLIB Research.
“Its other KPI to achieve is the 5%-7% non-trading revenue (NTR) growth which could be harder to hit as the lower base (previously from the absence of conferences & exhibitions) has diminished.”
Prospect-wise, the research house maintained its “hold” call on Bursa Malaysia but with a higher target price of RM7.36 (from RM7.12 previously).
“Although ADV is set to rebound strongly this year, we reckon that this has been priced in seeing that (i) Bursa’s rolling PE is +1.9SD (standard deviation) above the five-year mean and (ii) its PE (price-to-earnings) gap vs regional peers has widened to +1.9SD (ie currently at a premium of +6.6% vs the five-year average discount of -24.5%),” added HLIB Research.
At 11.55am, Bursa Malaysia was down 1 sen or 0.13% to RM7.45 with 373,600 shares traded, thus valuing the stock exchange operator at RM6.03 bil. – April 19, 2024
