SET against a robust equity average daily trading value (ADTV) since 2Q 2020 amid the low interest rate regime and the movement control order (MCO), Bursa Malaysia Bhd is widely expected to sustain its earnings moving into 2Q 2021.
Yesterday (April 27), the stock exchange operator reported a 1Q 2021 net profit of RM121.4 mil, surging 88.1% year-on-year (yoy) from RM64.73 mil in 1Q2020.
In fact, CGS-CIMB Research expects robust ADTV and the influx of retail liquidity into the equity market to persist as key drivers in the near future.
“We expect Bursa’s 2Q 2021F net profit to be close to (or slightly lower than) the level in 1Q 2021,” projected analyst Winson Ng in a company update. “Based on this, Bursa’s net profit growth would be at 30-40% yoy in 2Q 2021F.”
Following its outlook, the research house lifted its FY 2021F net profit forecast by 15.8% due to the 18.9% rise in its projected equity income as it increased the assumed FY2021F clearing fee rate (over total trading value) from 0.03% to 0.037%, closer to the 0.042% in 1Q 2021.
“However, our target price of RM9.18 is intact as it is pegged to an unchanged FY2022F earnings per share (EPS),” rationalised the research house. “(However), we retain our “hold” call on Bursa as we believe that the strong equity ADTV is largely priced in given its high FY2022F P/E (price-to-earnings ratio) of 29.3 times.”
Meanwhile, TA Securities Research, upgraded Bursa’s rating to “buy” (from “sell” previously) with a higher target price of RM10.30 (from RM 9.40 previously) on an implied FY2022 P/E of around 25.5 times.
“Given the recent decline in share price, Bursa potential upside has widened to more than 12%,” opined Li Hsia Wong. “With that, we upgrade Bursa from ‘sell’ to ‘buy.”.
Starting the new financial year on a firm footing, Bursa recorded another buoyant quarter, backed by various initiatives in place to sustain the retail momentum, according to the research house.
“These include (i) enhancing digital touch points; (ii) widening access and approach on investor education; (iii) fostering investor confidence,” observed TA Securities Research.
“We also foresee the current low interest rates environment and ongoing stimulus and relief measures to help sustain liquidity in the market.”
At 9.24am, Bursa was up 9 sen or 1.06% at RM8.58 with 165,300 shares traded, thus valuing the company at RM6.94 bil. – April 28, 2021
