LOWER daily average trading value (DATV) is expected to take toll on Bursa Malaysia Bhd, prompting AmBank Research to lower the stock market operator’s FY2022/2023 core earnings to red by 10.4%/9.8% to RM238 mil/RM246 mil.
This is after factoring in lower DATV of RM2.4 bil/RM2.5 bil (previously RM2.8 bil/RM2.6 bil) for the securities market for the two-year period.
“We now peg the stock to a lower price-to-earnings (P/E) ratio of 22 times,” projected analyst Kelvin Ong in a company update.
“We expect a weaker 4Q FY2021 earnings (-11.4% quarter-on-quarter [qoq] of RM71 mil due to lower DATV for securities market. This is expected to lead to a full FY2021 net profit of RM361 mil (-4.5% year-on-year [yoy]).”
Against such backdrop, AmResearch maintained its “hold” rating on Bursa Malaysia with a lower fair value of RM6.50/share (previously RM7.90/share). Bursa Malaysia is scheduled to release its 4Q FY2021 results this Friday (Jan 28).
In 4Q 2021, DATV (of on-market transactions) for equities declined to RM2.5 bil vs 3Q 2021 and 2Q 2021’s RM2.9 bil and RM3.8 bil respectively.
On a monthly basis, October, November and December 2021 saw lower DATV of RM2.9 bil, RM2.8 bil and RM1.9 bil respectively.
“In 2021, DATV for the securities market for the full year came in at RM3.5 bil, slightly lower than our estimate of RM3.7 bil,” noted AmResearch. “This was contributed by weaker trading activities in 4Q 2021. FY2021 saw a 15.8% yoy drop in DATV from RM4.2 bil in FY2020.”
On the securities market, there were 29 listings (Main Market: six, ACE Market: 11 and Leap Market: 12) in 2021 compared to 19 in 2020.
Moving forward, AmResearch continues to expect lower DATV assumptions for the securities market in FY2022/2023 compared to previous two financial years underpinned by:
- The gradual tapering of asset purchases by developed markets which is seen accelerating due to inflation pressures. This will reduce excess liquidity in the market;
- The end of broad loan repayment assistance programme (moratorium) after FY2021;
- Temporary suspension of RSS (regulated short selling), IDSS (intraday shirt selling) and PDT (proprietary day traders) short selling which have all been lifted; and
- The uptrend in interest rates.
At 3pm, Bursa Malaysia is unchanged at RM6.18 with 439,500 shares traded, thus valuing the stock exchange at RM5 bil. – Jan 26, 2022
