- We reiterate our BUY recommendation on Bursa Malaysia Bhd (Bursa), with an unchanged fair value of RM8.20/share. This is based on a PE of 26x FY13F earnings.

- Newswires are tipping 2014 to be another significant year for the local IPO market, which was relatively anemic in 2013. Last year, 17 new companies were brought to the market, raising RM8.2bil in proceeds.

- The bulk of listings (14) happened in the second half of 2013 as uncertainties on the timing and outcome of the 13th general election had kept companies, as well as investors, on the sidelines in the earlier part of the year.

- Although the number of listings in 2013 was similar to 2012’s, the total value raised in the latter was nearly triple, at RM22.9bil. This can be attributed to a number of prolific listings which helped to catapult the local bourse into the world’s top five markets for raising capital. Bursa Malaysia hosted two of the top 10 IPO deals in 2012, namely Felda Global Ventures Holdings (RM9.9bil) and IHH Healthcare (RM6.3bil).

- Last year, Hong Kong reclaimed its top spot as IPO capital while Malaysia slipped to 14th position. We believe that Hong Kong’s revival was partly due to the temporary closure of IPO activities in mainland China in October 2012 following accounting irregularities.

- According to various press reports, up to 15 listings are in the pipeline for 2014, with at least RM20bil to be raised. Included in this list are some offerings that were postponed from 2013 due to regulatory restrictions.

- Potential major IPOs in 2014 and their respective deal sizes are1MDB’s power assets (between RM3.3bil and RM6.6bil), Malakoff Corp (RM3.3bil), Medini Iskandar Malaysia (RM2.5bil), and Axiata Group’s telco tower assets (RM1.7bil).

- The greater number of IPOs would only serve to bolster Bursa’s top line. Listing and issuer services make up a third of its stable revenue, which in turn contributes a third to the group’s overall operating revenue. In our model, we have incorporated 20 new listings for this year.

- We maintain our numbers for now. The group is set to release its 4QFY13 numbers on January 29. We believe that its full year earnings will comfortably meet our FY13 estimate of RM181mil. 

Source: AmeSecurities