Post-NDR Update: Interest Remains Strong

We recently hosted a Non-Deal Roadshow (NDR) for Bursa Malaysia in Hong Kong and Singapore. In our view, investors were eager to learn about the proposed BURSA-SGX Link, why more foreign investors are coming to Malaysia and how new capital market measures will work. We remain upbeat on Bursa’s outlook, noting potential catalysts such as the BURSA-SGX Link (to be launched by end-2018) while 2018 could potentially be another robust year in the Malaysian equity market. Maintain BUY and PT of RM12.00.

Investors Are Generally Excited About Bursa Malaysia

Investors perceive Bursa as a beta play (being the proxy to the Malaysian securities market) and as a high-yield play. Bursa continues to be monitored closely by many investors due to the strong start in the equity market average daily value (ADV), which was about RM3.16bn between 2 Jan and 2 Mar 2018, almost 25% higher than 2017.

Key Interests – Bursa’s 4Q17, Capital Market Measures, Collaboration

The key discussion points were on Bursa’s recent 4Q17 results, capital market initiatives which were announced on 6 Feb 2018, initiatives to improve its product offering, IPO pipeline, sustainability of Bursa’s dividends, capex plans, sustainability of trading volumes and potential revision in fees. In our view, as investors continue to look for post-trade benefits of the Bursa-SGX Trading Link (to be up by end-2018), this would likely be the key re-rating factor not just for Bursa, but for all other listed securities on the exchange.

Missing Links in the Malaysian Securities/derivatives Markets

At present, the missing links in the Malaysian market are a more diversified structured product offering (such as single stock options, additional stock index future, mini-derivatives contracts) and key domestic institutional investors being in the derivatives market (as a hedging tool).

Maintain BUY. PT Unchanged at RM12.00 (based on a 26x 2018E P/E)

We Reiterate Our BUY Rating on Bursa, With a 12-month Price Target of RM12.00 based on a 26x P/E target on 2018E EPS. Key catalysts – new capital market measures, a stronger Ringgit, a stronger pipeline of IPOs and run-up to the general election. Our assumptions – securities market ADV of RM2.8bn and RM2.6bn for 2018E-19E. Downside risks: geopolitical risks, and listing of a Malaysian ETF overseas.

Source: Affin Hwang Research - 7 Mar 2018