- We maintain our HOLD call on Bursa Malaysia (Bursa) with an unchanged fair value of RM8.90/share pegged to an unchanged PE of 26x.

- Bursa reported Q3FY15 net profit of RM51.5mil (+4% QoQ), extending its 9MFY15 earnings to RM148mil (+2% YoY). The results were in line, accounting for 71% of our estimates and 75% of consensus. No dividend was announced as expected.

- Bursa’s sustained earnings growth is largely attributed to higher operating revenue from its derivatives market and Islamic capital market products.

- 9MFY15 derivatives revenue grew 18% YoY to RM61mil as compared to RM51.6mil a year ago. This corresponds with the higher market volatility of the FBMKLCI, which Bursa measured at 16%, as compared to a volatility rate of 7% for the same period in FY14. Proliferation of derivatives products was supported by the higher number of FKLI and FCPO Average Daily Contracts trading in the marketplace of 57,552 (+16.7% YoY).

- For the Islamic Capital Market, BSAS impressed with a 137.7% jump in its Average Daily Value (ADV) to RM13.8bil due to the ongoing conversion to Murabaha following the introduction of tenor-based pricing in FY15. Accordingly, the Others segment profit registered a hike of 178% to RM8.1mil YoY.

- Equities trading revenue (contributing 47% of operating revenue) declined by 4% YoY, due to a decline of ADV for On-Market Trades (OMT) by 6% YoY. Equities trading revenue was subdued on a QoQ basis, declining by 2% to RM57mil. This is despite velocity improving by 1ppt QoQ to reach 29% in the 9 month period.

- 9MFY15 listing fees were lower by RM3mil (-5.3% YoY), due to the absence of significant IPO activity.

- On the cost side, operating costs went up by 1% QoQ, mainly due to increased trading volumes in 3QFY15.

- Looking ahead, we expect the equities segment to remain subdued due to the dampened investor sentiment, and general economic and domestic uncertainties.

- However, we believe the strong growth of Bursa’s derivative and Islamic capital markets will continue to negate the decline in equities and lead the overall growth in Bursa in the near term.

- We leave our FY15F-FY17 earnings estimates unchanged. The stock is currently trading at 22x FY15F PE, at its 5-year PE average.

Source: AmeSecurities Research - 26 Oct 2015