1Q16/3M16
Within expectations. The group reported 1Q16 net profit of RM49.9m which made up 27% and 24% of our and the consensus’ full-year estimates, respectively.
As expected, no dividend was declared under the quarter reviewed.
YoY, operating revenue increased by 5% with better performance in stable revenue (+11%) superseding the flat growth in trading revenue (+2%, which was dragged by lower securities trading revenue) coupled with the decent growth in “other income” segment (+7%) which was predominantly driven by higher interest income (+11%), total income grew by 5%.
On a closer look at the star performer- stable revenue, the decent performance was anchored by both: (i) higher growth from Bursa Suq Al-Sila (BSAS) growing 26% to RM13.3m), on the back of higher adoption of the Murabaha concept as well as (ii) better listing and issuer services revenue (+22%) on higher listing fees, higher number of corporate exercises and IPOs in 1Q16. At the bottomline, with cost-to-income ratio (CIR) stabilising at 47.3% (vis-à-vis 1Q15: 47.4%), the group’s net profit grew by 6%, reflective of the underlying strong performance from the top line.
QoQ, total income decreased by 1% as marginal growth at the operating revenue (+1) was negated by seasonally weaker performance in the “other income” segment (-25%).
Delving deeper at the operating revenue, decent growth contribution from stable revenue (+8%) was erased by weaker trading revenue (-3%, on the back of thinner average daily trading volume and value in the securities market, at -16% and -4% respectively). With stable CIR, the group’s net profit decreased by 1%.
Fluctuation in commodities prices, Ringgit, China’s economic slowdown and expectations of a gradual rise in US interest rate will continue to cast a long shadow over market sentiment.
Challenging external headwinds still linger and our strategist is now forecasting the local bourse to hit 1,725-point by end-2016, lower than what was initially projected at 1,755-points, amid: (i) modest corporate earnings growth (4%-8% YoY for FY16- FY17) coupled with (ii) cautious investment sentiment.
Meanwhile, we are keeping our conservative stance by forecasting average trading value and volume for the equity market in 2016 at RM1.87bn (-5% YoY) and 1.89bn shares (-4% YoY). As for the derivatives market, we expect total volume for future contracts to slow down by -5% YoY.
Post our earnings model update, FY16E NP has been marginally tweaked by +3% for house-keeping purposes. Meanwhile, we also introduced our FY17E NP.
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Post revision, our TP has been increased to RM8.56 from RM7.60 as we rollover our valuation base year to FY17. Our valuation is based on a targeted FY17E PER of 22.0x (at its 5-year average P/E).
Higher-than-expected trading volume in the securities and derivatives markets.
Lower-than-expected opex.
More IPOs.
Source: Kenanga Research - 26 Apr 2016
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