Period     2Q13/6MFY13

Actual vs.  Expectations   The reported 2Q13 net profit of RM54.8m was way above our expectation of RM39.7m. 

The total 6M13 net profit of RM93.0m accounted for approximately 58% of our earlier full-year forecast of RM159m. Nonetheless, it was only accounted for ~53% of consensus estimate of RM173m.

Dividends    Apart from a 16.0 sen single-tier interim dividend/share, BURSA also proposes a 20.0 sen special dividend as well, amounting to a total NDPS of 36.0 sen for 1H13. This is way above our interim dividend estimate of 13.5 sen. 

Hence, we revise our FY13 NPS from 27.5 sen to 50.0 sen

Key Result Highlights  2Q13 vs. 1Q13: Operating revenue and net profit increased 20.1% and 43.5% QoQ, respectively, to RM122.2m and RM54.8m. The strong earnings growth was attributed  to a more vibrant trading/investment environment, especially after the conclusion of the 13th General Election. The securities market recorded trading revenue of RM65.8m, representing a 52.1% QoQ increase, due to higher average daily trading value and volume of RM2.31b and 1.66b shares on the securities market in 2Q13 compared to RM1.55b and 1.19b shares in 1Q13.  While the stable Revenue declined a marginal 3%, listing fees had somewhat improved 21% to RM13.7m due to higher number of IPOs (5 in 2Q13 vs. 2 in 1Q13) and new structured warrants. Meanwhile, total opex was well-controlled at RM53.0m as opposed to RM54.9m in 1Q13.

1H13 vs. 1H12: Operating revenue and net profit increased 13.5% and 18.7% YoY, respectively, to RM223.9m and RM93.0m in line with better market condition i.e. higher FBMKLCI level (1,774 vs. 1,599) & higher average FBMKLCI market cap (RM955b vs. RM826b) as well as higher average daily trading value (RM1.98b vs. RM1.67b) despite a slight lower average daily trading volume (1.33b vs. 1.55b shares). While listing and issuer services decreased by 5% to RM25.0m in 1H13 compared to 1H12, the derivatives market came to rescue with an 18% YoY increase in profit (RM25.3m in 1H13, vs. RM21.4m in 1H12) attributed to a higher number of contracts traded. 

Outlook    Going forward, we believe Bursa should be able to report better YoY numbers in the remaining 2 quarters of 2013.

However, the 2Q13 results could probably be the peak for 2013. This is because we expect daily trading activities to normalise to ~RM2.0b traded value and 1.5b trading  volume from RM2.4b and 1.7b, respectively, after the 13th  General Election.

Change to Forecasts   With decent potential upside and market clarity after GE, we have revised upwards our earnings estimates by 13.0% and 14.7% from RM158.8m and RM161.4m to RM179.5m and RM185.2m.

Rating  Maintain MARKET PERFORM

Valuation     With a targeted PER of 23x, +1SD level above 3-year average, we value the stock up to RM8.20 (on an ex-special dividend basis) from RM7.20 previously. Coupled with a 20.0 sen special dividend, we peg our new TP at RM8.40, implying 3.0% upside. Even with an expected total dividend of 50.0 sen/share in FY13, or 6.1% net dividend yield, we only rate this stock as MARKET PERFORM.

Risks    Much slower than expected market activities.

Source: Kenanga