Investment Highlights

• We maintain our HOLD recommendation and fair value on Bursa Malaysia (Bursa) of RM7.50/share based on FY19 PE of 24x (5-year historical average PE). Our earnings projections are unchanged.

• As expected, Bursa reported a weaker 3QFY18 earnings of RM50mil (-13.8% QoQ). This was largely due to a decline in trading revenue for equities, derivatives and lower stable revenue. Cumulatively for 9MFY18, net profit was flat at RM172mil (+2.6% YoY). 9MFY18 earnings were within expectations making up 71.2% and 71.6% of our and consensus estimate respectively.

• 9MFY18 saw a higher trading revenue of equities from rise in DATV (OMT) for equities (+6.5% YoY). However, this was offset by lower trading revenue for derivatives (-4.8% YoY) and a drop in Bursa Suq Al Sila (BSAS) trading revenue by 7.4%YoY due to the implementation of volume based pricing. Trading revenue for derivatives fell owing to a lower number of FCPO contracts traded and guarantee fees earned while market incentives incurred rose for 9MFY18.

• In 3QFY18, DATV (OMT) for equities was RM2.22bil. This was much lower compared with 1QFY18 and 2QFY18’s RM2.72bil and RM2.73bil respectively. With the slowdown in 3QFY18, DATV (OMT) for equities eased to RM2.56bil for 9MFY18. This was in line with our estimate for the full FY18 of RM2.5bil.

• Market turnover (velocity) for 3QFY18 fell to 30.0% compared to 37.0% in 2QFY18 and 35.0% in 1QFY18.

• Year to date (until end Sept 2018), foreign fund flows to equities remained in the negative territory of RM8.5bil on a cumulative basis. On a monthly basis, foreign fund inflows in July and Aug 2018 were –RM1.68bil and –RM99mil respectively, reflecting net selling of equities by foreign investors. In Sep 2018, a positive net foreign fund inflow of RM66mil was recorded. This was a contrasting difference to the strong positive inflow of foreign funds of RM3.4bil and RM959mil seen in Jan 2018 and Dec 2017 respectively.

• Sep 2018 saw the securities market foreign ownership continued to be stable at 23.6% as in Aug 2018 (July 2018: 23.5%).

• For 3QFY18, the ADC traded for the FKLI declined by 19.9% QoQ. Meanwhile, the average daily contracts (ADC) traded for FCPO was higher by 2.1% QoQ in 3QFY18.

Source: AmInvest Research - 30 Oct 2018