Bursa’s reported FY18 PATAMI of RM224.0m was in line, accounting for 95% and 97% of ours and consensus expectations. We expect marginally lower ADV in FY19 given the high-base effect of FY18’s ADV of RM2.6bn (driven by heightened trading post GE-14). However, we expect higher derivative contract volume trading (from FCPO and newly introduced futures instruments such as palm olein futures ‘FPOL’ and Mini FTSE Bursa Malaysia Mid 70 Index Futures ‘FM70’). We expect FY19 earnings to grow by 6.9%. Our forecasts remain unchanged. We maintain our BUY call with an unchanged TP of RM8.00 pegged to an unchanged PE multiple of 27x on FY19 EPS of 29.7 sen.

In line with expectations. Bursa’s reported FY18 PATAMI of RM224.0m was in line, accounting for 95% and 97% of ours and consensus expectations.

Dividend. Declared 11.6 sen per share going ex on 15/2/19 (4Q17: 18.5 sen).Total dividend for FY18 amounted to 33.6 (FY17: 43.5) sen per share.

QoQ. Lower average daily trading value (ADV) (-17.4%) resulted in slightly lower top line of RM121.0m from 123.2m (-1.7%). Despite this, PATAMI grew 3.3%, mainly due to significantly lower staff cost (-18.5%).

YoY. 4Q18 PATAMI shrank 6.2% to RM51.9m from RM55.3m, in tandem with lower top line of RM121.0m (-6.9%). The poorer earnings were mainly as a result of lesser equity trading revenue (-10.1%) evidenced by lower total equity trade value (4Q18: RM128.5bn vs 4Q17: RM162.4bn) (Figure 4).

YTD. FY18 revenue and PATAMI were relatively flat at +0.2% and +0.4%, respectively. Higher trading revenue (underpinned by exuberant equity trading activity from post-election time period) (+2.4%) was partially offset by lower derivative revenue (RM76.7m). Derivatives suffered from lower FCPO trading volume (-12.2%) which was due to low CPO price, negating the need for CPO price hedging activity. Despite this, we note that lower FCPO volume was partially mitigated from higher FKLI trading volume, which resulted from volatility in the FBMKLCI.

Outlook. We expect marginally lower ADV in FY19 given the high-base effect of FY18’s ADV of RM2.6bn (driven by heightened trading post GE-14). However, we expect higher derivative contract volume trading (from FCPO and newly introduced futures instruments such as palm olein futures ‘FPOL’ and Mini FTSE Bursa Malaysia Mid 70 Index Futures ‘FM70’).

Forecast. Unchanged as the Results Were Inline.

Maintain BUY. We maintain our BUY call with an unchanged TP of RM8.00. Our TP of RM8.00 is pegged to an unchanged PE multiple of 27x FY19 EPS of 29.7 sen. We like Bursa as a proxy to Malaysia’s longer term reform prospects post GE14, operating leverage and decent dividend yield of 3.9%.

Source: Hong Leong Investment Bank Research - 31 Jan 2019