M&A: All stars aligned

All stars aligned. With a strong presence in the primary market (40.6% of the group’s revenue is derived from the CF segment) and exposure to the secondary market through its brokerage business (32.9% of its revenue), we view M&A as a good proxy to capitalize on the anticipated strong performance of both the primary and secondary markets in CY24. With strong ADV and IPOs recorded in CY24-YTD, we expect M&A to post a stellar 3QFY24 earnings and may record an even stronger showing in 4QFY24.

Brokerage business. Securities ADV recorded a strong figure of RM2.93bn (+35.6% QoQ, +36.7% YoY) in 1QCY24, with this strong momentum continuing into 2QCY24, where the QTD ADV has reached RM3.1bn. The spike in securities ADV was particularly strong in May, with a MTD ADV of RM3.4bn, driven by a strong influx of foreign funds that pushed the KLCI to the 1,600-point mark. For CY24, we project securities ADV to achieve strong 25% YoY growth to RM2.5bn from RM2.0bn in CY23. We believe this growth will be supported by two key tailwinds: (i) externally, the anticipated end of the Fed’s rate upcycle and a potential pivot, expected in 4QCY24, and (ii) domestically, a reduction in the political risk premium that has weighed on the local bourse for the past two years, with GE16 not expected until late 2027 or early 2028.

Primary market. In 3QFY24, M&A completed a total of four IPO projects (one on the Main Market and three on the ACE Market). We expect this number to increase in 4QFY24 and may gain traction in FY25. Notably, Bursa Malaysia is targeting a record high of 42 IPOs in 2024 (source), with activity expected to pick up from 2QCY24 onwards. Within this landscape, M&A, with its primary focus on ACE Market listings, supported by extensive headcounts in CF and relevant experience, has emerged as a key player poised to capitalize on this IPO wave. We highlight that M&A secured the highest number of IPOs in FY22 and FY23, with nine and seven IPOs respectively.

Pending rectangle breakout. M&A is pending for a rectangle breakout. A successful breakout above RM0.40 level will signal a new uptrend and potentially propel the price toward RM0.45-0.48-0.50 levels. Cut loss at RM0.34.

Collection range: RM0.35-0.36-0.37

Upside targets: RM0.45-0.48-0.50

Cut loss: RM0.34