Bursa reported FY22 PATMI of RM227m (-36% YoY) which accounted for 99%/100% of our/consensus forecast. Drag from Securities (ADV: -42% YoY) was the main reason for the YoY decline. Management shared its FY23 financial KPIs: (i) PBT of RM295-326m, which our forecast sits within and (ii) NTR growth of 5-7% – seems a tad high in our view. After two consecutive years of ADV decline, we are hopeful for a modest reprieve in FY23. Maintain HOLD with unchanged TP of RM6.43 (22x FY23 PE). Current MC/ADV ratio of 2.7x (+0.7SD) isn’t stretched but isn’t exactly attractive either.

Within expectations. Bursa reported 4Q22 PATMI of RM49m (-2.2% QoQ, -24.6% YoY), bringing FY22’s full year sum to RM226.6m (-36.2% YoY). The latter accounted for 99%/100% of our/consensus full year forecast, which is inline.

Dividend. Final dividend of 11.5 sen was declared (4Q21: 17 sen). This brings FY22 DPS to 26.5 sen (FY21: 41 sen).

QoQ. Revenue rose slightly by +3.2% as the increase in Securities (+8.5%; ADV +19.4% but had 3 fewer trading days) and Others (+2.8%) was partially offset by the decline in Derivatives (-7.2%; ADC -2.5%). Given the higher quantum of opex increase (+9%), cost-to-income ratio (CIR) rose from 52.4% to 55.3%, causing PATMI to decline -2.2%.

YoY. Decline in revenue (-13.3%) was largely attributed to the drop in Securities (- 27.1%; ADV: -23.6%, alongside 3 lesser trading days) and Others (-2.3%) but was partially cushioned from the increase in Derivatives (10.6%; ADC: +12%). Coupled with a rise in opex (+3.4%), CIR spiked from 46.6% to 55.3%, resulting to a decrease in PATMI by -24.6%.

YTD. Revenue declined -22.1%, again attributed to the plunge in Securities (-40.5%; ADV: -41.7%) but was partly buffered by improvement in Derivatives (+11.3%; ADC +4.6% and revenue per contract rose +7.3%), while Others was flattish (+1.5%). Coupled with a marginal uptick in opex (+1.4%), CIR jumped from 38.3% to 49.8%, causing PATMI to dive -36.2%.

FY23 KPIs. Bursa shared its headline financial KPIs for FY23. Firstly, it has set a PBT target of RM295-326m which we believe is attainable – our FY23 PBT forecast of RM318m sits within this range. Secondly, it aims for non-trading revenue (NTR) growth of 5-7% YoY – we reckon this may be a tad optimistic considering that Other revenue (a gauge for NTR) grew at a lower CAGR of 4.4% over the past decade.

Outlook. After two straight years of ADV contraction, we are hopeful for a modest reprieve in FY23 (we have pencilled in RM2.2bn) – note that in the past decade, ADV has never declined for more than two consecutive years. Granted, Jan’s ADV of RM2.0bn is short of our FY23 target, but we are still in the early days. While the rising probability of a US recession and its contagion could dampen investor sentiment, we reckon that China’s reopening will offer some cushioning effect to this.

Forecast. Unchanged as the Results Were Inline.

Maintain HOLD, TP: RM6.43. We maintain our HOLD rating on Bursa with unchanged TP of RM6.43 based on 22x PE (+0.5SD 5Y) tagged FY23 EPS. Bursa’s MC/ADV ratio of 2.68x or +0.7SD above 5Y mean isn’t stretched but isn’t exactly attractive either.

Source: Hong Leong Investment Bank Research - 2 Feb 2023