STOCK FOCUS OF THE DAY
Bursa Malaysia: Stronger earnings expected for 1QFY18 HOLD
We raise our fair value on Bursa Malaysia (Bursa) to RM7.50/share from RM6.90/share after the completion of its bonus issue by rolling over our valuation to FY19 based on a PE of 24x (5-year historical average PE). While we remain positive on the local equity market, we continue to see the stock trading at a higher valuation (23.4x PER) compared to the stock exchanges of Singapore (SGX Exchange Ltd) of 20.1x PER and Australia (ASX Ltd) of 22.5x PER. Hence, we maintain our HOLD recommendation. We make no changes to our earnings estimates.
Bursa has completed its bonus issue of 1 bonus share for every 2 existing shares held, resulting in an issuance of 268.7mil bonus shares. This has enlarged its number of shares from 537.5mil to 806.3mil shares. Our estimates have already taken into account the enlarged number of shares.
We keep our 2018 KLCI target of 1,900 while for 2019, we have a year-end target of 2,040. This is supported by an earnings growth of 6.8% and 7.3% for the FBM KLCI on the back of projected GDP growth of 5.5% and 5.3% respectively for 2018 and 2019. This is at a 1x multiple premium to the 5-year historical average of about 17x, largely to reflect the cyclical upturn in corporation earnings growth.
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DISCLAIMER:
The information and opinions in this report were prepared by AmInvestment Bank Bhd. The investments discussed or recommended in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of AmInvestment Bank Bhd. Bhd may from time to time have a position in or with the securities mentioned herein. Members of the AmBank Group Bhd and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgment as of this date and are subject to change without notice.
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