Period 

2Q15/1H15

1H15 net profit of RM97m (+5% YoY) was in line with expectations, making up 48-50% of our and consensus’ full-year forecasts.

Dividends

As expected, an interim DPS of 16.5 sen was declared (1H14: 16.0 sen) and the company did not dish out any special dividend (1H14: 20.0 sen).

Key Results Highlights

• In tandem with a 4% rise in operating revenue, net profit grew 5%.
• The 4% increase in operating revenue came on the back of higher trading revenue from the derivatives market (+20%); daily average trading volume for index and CPO futures rose 6% and 24% respectively.
• Bursa Suq Al-Sila (BSAS) trading revenue jumped 101% due to: (i) conversion of deposits to Murabaha, and (ii) introduction of tenor based pricing. 
• Listing and issuer services revenue fell 5% as a result of fewer IPO and corporate exercises. 
• Market data revenue spiked 9% from larger subscriber base. 
• On the backdrop of falling staff cost (-2%) and D&A expenses (-9%), cost-to-income ratio (CIR) improved to 46% (-1ppts).

• Earnings increased 5% thanks to lower opex (-5%). That said, the performance was capped by flat operating revenue. 
• Operating revenue was lethargic given weak trading revenue from the derivatives market (-5%); daily average trading volume for CPO futures fell 17%. 
• CIR fell 2ppts as market and development expenses declined 56%.

Outlook

• Debt crisis at Greece, meltdown of China’s stock market as well as lingering domestic issues should continue to cast a long shadow over market sentiment. 
• Hence, the current choppy market environment is likely to stay, driving investors to the sideline or to exit. 
• Overall, we expect lacklustre trading activities in the securities market over the short-term. 

Change to Forecasts

No change to our forecasts.

Rating

Maintain MARKET PERFORM

• Limited upside with lack of re-rating catalysts on the horizon. 
• We do not expect any special dividend payout in the next two years given its diminished cash reserves. That said, it is still a debt-free company.

Valuation

We maintain our TP at RM8.30 based on an unchanged FY16E P/E of 22.5x (-0.5SD below its 5-year average P/E). This is also in line with the valuation multiples of its regional peers.

Risks to Our Call

• Lower-than-expected trading volume in the securities and derivatives markets. 
• Higher-than-expected opex.