AMINVESTMENT Bank has maintained its buy call for Bursa Malaysia Bhd with a revised fair value of RM8.20 a share from a previous RM6.40 a share on the back of higher earnings and trade assumptions.
“Our FY20/21/22 earnings have been raised by 17.2%-43.4%, factoring in higher daily average trading value (DATV) of RM2.8/2.5/2.65bil for the securities market. Also, we have increased our assumptions for the average daily contracts (ADC) traded for derivatives in FY20/21/22 to 65,000/67,600/69,628. We continue to peg the stock to a PE of 24.0x (5-year historical average PE),” AmInvestment analyst Kelvin Ong said today’s note.
The continued volatility would augur well for the securities and derivates market, Ong said.
“Bursa is likely to release its 2Q20 results in the final week of July. We expect a robust 2Q20 earnings of RM90-91 mil which will be higher than 1Q20’s RM65 mil.
“This is based on a record DATV for equities of RM3.8 bil in 2Q20, significantly higher than the preceding quarter. YTD (Jan to May 20), the effective clearing fee rate rose to a record 2.69bps vs. 2.30bps in FY19 on higher retail investors’ participation,” he added.
Derivatives trading revenue will also be softer quarter-on-quarter in 2Q20 on the back of lower number of contracts traded for Crude Palm Oil Futures and the FTSE Bursa Malaysia KLCI Futures.
“This is attributed to the shorter number of trading days in May 20 coupled with more stable CPO prices and securities market in the quarter,” Ong said.
As for the securities market, DATV (on OMT basis) for equities climbed to RM3.8 bil in 2Q20 (April 1 until June 23) versus RM2.5 bil in 1Q20.
“This has resulted in a YTD DATV for equities of RM3.1bil,” Ong said.
Bursa opened 0.55% lower at RM7.24. – June 29, 2020
