- We reaffirm our BUY recommendation on Bursa Malaysia Bhd (Bursa) with an unchanged fair value of RM9.50/share following news of its derivatives market attaining a record high in 2014.

- In a media release yesterday, Bursa Malaysia announced that the average daily contracts traded (ADC) in 2014 was 50,654 contracts – a 17% increase compared to 2013’s ADC of 43,315 contracts.

- The jump in ADC was mainly due to the 28% growth in trading of Crude Palm Oil Futures (FCPO) contracts. The ADC for FCPO in 2014 was 41,285 contracts while in 2013 it was 32,251 contracts. Annual contract volumes for FCPO had also surpassed the 10mil mark for the first time.

- Bursa Malaysia attributes the strong growth in the FCPO volumes to the increased volatility in the crude oil and oilseed markets over the past year.

- Note that the FCPO contracts historically make up the bulk (81% for 9MFY14) of volumes on Bursa’s derivatives platform followed by FBM KLCI Futures (FKLI) contracts at 17%. The remaining 2% consists of other contracts such as CPO options, gold futures and KLIBOR futures.

- We are not surprised by this development as Bursa’s derivatives division has been growing from strength to strength since the formation of its partnership with CME Globex in 4QFY09.

- The group’s ADC had been on a double-digit growth since then. That said, the 50,064 ADC it achieved in 2014 remains significant as it marks the achievement of one of its medium-term targets.

- We are keeping our FY14F-FY16F earnings estimates for now pending the group’s FY14 results which will be announced on 29 January 2015.

Source: AmeSecurities