Bursa reported FY21 core PATMI of RM355m (-6% YoY) which was within ours/consensus expectation at 104%/102% of full year forecast. A final dividend of 17 sen was declared. While the stamp duty cap was reintroduced (at a higher ceiling of RM1k), we have yet to see a meaningful reprieve in ADV. We expect guarded trading by investors in absence of fresh market catalysts, alongside headwinds from Omicron, supply chain disruptions and monetary tightening. Forecast remains unchanged. Valuation looks fair from a MC/ADV ratio perspective at 2.37x or +0.3SD above 10Y mean. Maintain HOLD with unchanged TP of RM5.95 (20x FY22 PE).

Within expectations. Bursa reported 4QFY21 core PATMI of RM65m (-18.7% QoQ, -38.1% YoY), which brought the full year FY21 sum to RM355.3m, down -6% YoY. The results were within expectations at 104% of our full year forecast (consensus: 102%).

Dividend. Declared a final dividend of 17 sen for 4QFY21 (SPLY: 26 sen final + 8 sen special). This brings FY21 dividend to 41 sen (FY20: 51 sen), higher than our projected 38 sen.

QoQ. Revenue fell -4.9% mainly attributed to the decline in Securities (-11.5%; ADV fell -12.3% to RM2.53bn) while Derivatives (+3.0%; ADC down -0.3%) and Others (+3.5%) held ground. Alongside a +12.4% rise in opex (typically heavier in 4Q), this trickled down to core PATMI decreasing by -18.7%.

YoY. The -28.1% revenue decline was largely due to the decrease in Securities (-44.6%; ADV down -47.5% from a high base in 4Q20 which was driven by vaccine led recovery optimism). The fall in Securities revenue was partially cushioned by stronger contribution from Others (+7.2%) while Derivatives held steady (-1.6%; ADC -0.8%). Despite opex reduction by -17.5%, this was insufficient to offset topline decline, resulting to core PATMI falling -38.1%.

YTD. Revenue slipped slightly (-3.5%) as the drop in Securities (-11.2%; ADV down -15.8%) and Derivatives (-4.1%; ADC rose +2.3% but revenue per contract fell -5.1%) was largely offset by increase in Others (+17.3%; growth across all sub segments except conferences). With relatively flattish opex (-1.1%), core PATMI saw a modest reduction of -6%.

Outlook. While the stamp duty cap was reintroduced towards end-2021 – albeit at a higher ceiling of RM1k vs RM200 previously – we have yet to see meaningful reprieve in ADV. While Jan’s ADV (RM2.08bn) saw a +6.3% MoM recovery, this is still below 4Q21’s RM2.55bn and 2021’s RM3.55bn. With the absence of fresh market catalysts, alongside headwinds from Omicron, supply chain disruptions and monetary tightening, we expect guarded trading by market participants. Possibility of an early GE15 could be a boon for ADV – past three GEs saw ADV pick up surrounding the polls – but it remains fluid when this will happen (deadline by mid-2023).

Forecast. Unchanged as the results were inline. We have imputed ADV of RM2.48bn (-30% YoY) for FY22 – which admittedly, looks shaky considering Jan’s numbers. On the Prosperity Tax, management expects its effective tax rate to increase 2ppts. However the actual outcome is likely to be lower as the guidance is based on the assumption that ADV remains at FY21’s level.

Maintain HOLD, TP: RM5.95. We keep our HOLD rating on Bursa with unchanged TP of RM5.95 based on 20x PE (5Y mean) tagged to FY22 EPS. Valuations look broadly fair from a MC/ADV ratio perspective at 2.37x or +0.3SD above 10Y mean.

Source: Hong Leong Investment Bank Research - 31 Jan 2022