ANTICIPATING Bursa Malaysia Bhd’s FY2022 net profit to dip by 34% year-on-year (yoy) as equity average daily trade volume (ADV) normalises towards pre-pandemic level, Maybank IB Research has downgraded the stock market operator to “sell” (from “hold” previously).
Although it maintained Bursa Malaysia’s target price at RM6.38, the research house is also wary of lacking catalysts with growth, policy risks and politics impacting sentiment and trading activities.
“Bursa’s current share price implies RM2.8 bil equity ADV for 2022E vs YTD’s (year-to-date) RM2.6 bil,” head of research Wong Chew Hann pointed out in a results review. This is despite the local bourse’s 1Q 2022 results made up 29%/27% of the research house/street’s FY2022E net earnings.
Bursa Malaysia’s 1Q FY2022 earnings came in lower at RM68 mil (-44% yoy) largely due to the decline in trading revenue for securities market (-46.7% yoy). This came on the back of retail ADV having shrunk significantly by 64% yoy while new CDS (Central Depository System) account openings by retail investors fell drastically by 62% yoy to 32,500.
“Bursa anticipates a more challenging and competitive environment ahead amid tightening liquidity and normalisation of trading volumes,” justified Maybank IB Research.
“Hence, it expects to register a moderate performance as compared to FY2021. Nonetheless, it will strive to deliver the planned initiatives which include new product and service offerings, as well as the new voluntary carbon trading platform.”
On a positive note, Bursa Malaysia’s balance sheet remains strong with a net cash balance of RM415 mil (51sen/share) as of end-1Q FY2022.
Elsewhere, TA Securities Research also downgraded Bursa Malaysia to “hold” (from “buy” previously) but retained its target price at RM7.25 due to the recent increase in its share price which has narrowed the total upside to between 7% and 12%.
“Key downside risks include (i) softer corporate earnings due to the proposal to impose a one-off windfall tax under Budget 2022, (ii) inability to sustain foreign inflows due to the intense competition from attractive regional markets; (iii) fragile consumer and business confidence; and (iv) the ongoing domestic political debacle,” suggested analyst Li Hsia Wong.
At 9.58am, Bursa Malaysia was down 9 sen or 1.29% to RM6.86 with 190,700 shares traded, thus valuing the company at RM5.55 bil. – April 29, 2022
