AmWatch - Bursa Malaysia : 2QFY15: Results in line, buoyed by derivatives, 16 Jul 2015

STOCK FOCUS OF THE DAY

Bursa Malaysia : 2QFY15: Results in line, buoyed by derivatives               Hold

We maintain our HOLD recommendation on Bursa Malaysia with an unchanged fair value of RM8.90/share, based on FY15F PE of 23x. Bursa reported 2QFY15 net profit of RM49.5mil (QoQ: +5.2%) to extend its 1HFY15 earnings to RM96.5mil. The results were within expectations, accounting for 47% of our and 48% of market estimates.

Management declared an interim dividend of 16.5sen, which is equivalent to a payout ratio of 91%. No special dividend is expected in the near term. Despite the pared down market sentiment due to the difficult domestic and global environment, Bursa’s performance in 1HFY15 is commendable, slightly buoyed by growth in its derivatives and Islamic products.

Derivatives trading revenue in 1HFY15 grew by 11.9% YoY, mainly attributed to the volatile palm oil prices during the quarter, which spurred FCPO trades (FCPO makes up 81% of the ADC). Its BSAS trading revenue (Islamic product) also doubled. Equities trading revenue, which is Bursa’s key contributor, was unchanged at RM116mil.

However, Bursa’s securities market statistics disappointed slightly, with Average Daily Traded Value (ADTV) lower at RM2bil (YoY: -8%). Also trading velocity dropped 2ppts to 28%. We believe that this is due to the poor retail participation and market sentiment. On the other hand, foreign shareholding declined by only by 1ppt to 28%, with foreign ADTV of RM550mil during these challenging times.

Looking ahead, the market environment for the remaining of FY15 will be challenging. However, we believe the growth of its derivatives and Islamic products, as well as further IPO revenue will negate any negativity felt from the equities market. Bursa had earlier this week loosened its regulations for the ACE market to attract more listings. We leave our FY15F-FY17F earnings estimates unchanged. The stock is currently trading at 21x FY15F PE, slightly below its 5-year PE average of 22x.

Others :

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QUICK TAKE

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