• We maintain our HOLD recommendation with an unchanged fair value on Bursa Malaysia (Bursa) of RM6.15/share. Our valuation is based on FY20 PE of 24.0x (5-year historical average PE).

• Bursa announced the disposal of 85,000 shares of CME Group that it owns to raise a total sum of US$17.6mil or RM73.4mil. The initial cost of the 85,000 CME Group shares was US$5.58mil which equates to US$65.65/share.

• The shares were disposed of in the open market on the Nasdaq Stock Market. This leaves a balance of 297,135 CME Group shares held by Bursa.

• The sales proceeds will be utilized to partly fund the acquisition of a 25% stake or 12,500,000 shares in Bursa Derivatives that it does not own from CME Group Strategic Investments LLC (CMEGSI) through the exercise of put option by CME Group Inc (CME Group) on 16 Sep 2019. CMEGSI is the wholly-owned subsidiary of CME Group.

• Recall that the acquisition price for the 25% equity in Bursa Derivatives was RM164.6mil. This comprises a put option value of RM162,471,000 payable to CMEGSI and a provision of RM2,182,000 for the additional sum estimated in other payables.

• The aforementioned acquisition is likely to be completed by early December 2019.

• We do not expect gains to be recognized from the disposal of the CME Group shares. This is in view of the fact that the investment securities (CME Group shares) in Bursa’s balance sheet are already marked to market. Hence, it will not have any impact on our net profit and EPS estimates.

Source: AmInvest Research - 26 Nov 2019