Bursa reported FY20 PATMI of RM378m (+100% YoY) which was within our expectations (102%) and consensus (105%). DPS of 34 sen was declared (26 sen final + 8 sen special). FY21 is off to a good start with robust Jan ADV at RM5.04bn (vs our full year assumption of RM3.36bn). Opposing news flow between vaccines and Covid headwinds will make this a volatile trading market, auguring well for ADV. Maintain forecast and BUY rating with TP of RM11.46 (30x PE on FY21 EPS).

Finishing inline. Bursa reported 4QFY20 core PATMI of RM104.9m (-14% QoQ, +114.6% YoY), bringing FY20’s sum to RM377.7m (+99.7% YoY; note that RM3m software impairment was removed from last year’s sum to calculate the YoY change). The latter accounted for 102% of our full year forecast (consensus: 105%), which is within expectations.

SST provision. Opex (ex. finance cost) for FY20 rose 20.1% YoY. Included in this sum was a RM13.6m provision related to SST as the expanded tax scope may encompass some of Bursa’s services. As this the final outcome of this has yet to be made, we have decided not to treat this provision as an EI.

Special D. Bursa declared a final DPS of 26 sen plus a special of 8 sen (4Q total: 34 sen). This brings total DPS for FY20 to 51 sen (FY19: 20.8 sen).

QoQ. Revenue saw a -3.6% dip mainly due to Securities (-7%; ADV fell -15.6% but slightly cushioned by 2 additional trading days and higher implied securities rate) while being partially offset by slightly stronger Derivatives (+2.9%; ADC rose +2.9%). Alongside a 24.7% rise in opex but partially mitigated by lower effective tax rate (25.8% to 24.7%), core PATMI fell -14%.

YoY. Revenue surged 83.3% given a rise in all segments, particularly Securities (+152.9%; ADV soared 169.6%). Despite opex increase by 46%, strong topline growth managed to propel core PATMI 114.6% higher.

YTD. Revenue jumped 62.2%, driven most notably by Securities (+114.3%; ADV up +117.5%) and Derivatives (+26%; ADC rose 33.6%). After accounting for 20.1% rise in opex, core PATMI doubled (+99.7%).

Outlook. 2021 is off to a good start for Bursa with Jan ADV at RM5.04bn (Dec: RM5bn, 2020: RM4.21bn). We believe the market’s recovery path will be a volatile one, given opposing news flow between vaccines and a still elevated Covid count. We believe 1H21 will very much be a “trading market”, as investors actively rotate back and forth between recovery plays and gloves, auguring well for ADV. With foreign shareholding (Dec: 20.7%) at the GFC low, alongside a vaccine led recovery climate, the base now appears palatable to envision their re-entry.

Forecast. Unchanged as the results were inline. Nonetheless, should ADV sustain at current levels (Jan: RM5.04bn vs our FY21 assumption of RM3.36bn), there would be upside to our estimates.

Maintain BUY, TP: RM11.46. We maintain our BUY rating on Bursa with unchanged TP of RM11.46 based on 30x PE tagged to FY21 EPS. Our PE multiple reflects (i) roughly +1.5SD above 5Y mean which we reckon is justified given what appears to be a structurally higher earnings base and (ii) inline with the average (31.1x) of its peers (SGX, HKX, ASX and NZX). Bursa’s MC/ADV ratio (end-Jan) is at -1.5SD (1.50x) below mean (2.27x), suggesting inexpensiveness on this front.

Source: Hong Leong Investment Bank Research - 3 Feb 2021