Bursa posted its best ever performance in FY20 with PATAMI of RM378m as ADV hit a record-high of RM4.2b. A volatile market, a low interest rate regime with surging retail participation boosted trading activities despite being the 3rd consecutive year of net foreign outflow. Although we expect trading activities for FY21 to taper, the trading level nevertheless could remain relatively robust. Raised FY21E earnings; hence, TP raised to RM9.65 by applying a 5-year mean PER of 22x to its FY21E EPS. MARKET PERFORM retained. Current dividend yield of 4.3% appears attractive and could be enhanced by a possible special dividend payout given its robust outlook.

Within. FY20 PATAMI of RM378m came in within expectations making up 105% of both our/consensus full-year estimates. A final DPS of 26.0 sen was declared translating to a payout ratio of 92% (in line). Coupled with a special DPS (as expected) of 8.0 sen, the final FY20 DPS came up to 51.0 sen per share.

Retailers outpaced Institutions. FY20 trading revenue surged ahead by 93% to RM590m, driven by both securities (+114%) and derivatives (26%) markets. The equities Daily Average Trading Value (ADV) continued to hit fresh record high, at RM4.2b (+117% YTD) driven by retail investors at +236% or RM1.59b vs. domestic institutions at RM1.94b (+117%). Participation rate from retail investors was higher at 38% (FY19: 25%) with institutional investors at 62% (FY19: 75%). Foreign participation fell to 17% (FY19: 30%). Meanwhile, funds raised from new listings and secondary market surged 51% to RM10b driven by secondary market at RM8b (FY19:RM4.6b) but new listings were flat at RM2.0b. The positive JAW saw CIR fell 13ppt to 36% despite opex seeing a 24ppt uptick underpinned by investments in technology (+16% to RM46m).

QoQ, as expected ADV fell 16% to RM4.8b with turnover velocity shaving 16ppt to 65%. Trading revenue fell 6% to RM171m underpinned by the 7% drop in the securities market to RM150m with derivatives revenue seeing a slight improvement of +3%. The market was largely domestic driven as foreign outflow continued unabated to RM2.3b (3QFY21: RM6.0b outflow). Total net foreign outflow for FY20 was at RM26b vs. FY19 outflow of RM11b.

Volatility in 1HFY21? We are of the view that 2021 will see a gradual tapering of trading activities albeit remaining relatively robust. Jan 2021 ADV started strongly at RM5.0b but on a MoM basis it moderated at +1% (vs. Jan 2020: +20% MoM). We opined the market will see continued volatility given the risks of further wave of the pandemic and prolonged lockdown. Given the low interest rate regime, domestic retailers’ participation is expected to be robust and boosted by the wide availability of efficient online trading platforms. ADV online trades grew 156% to RM2.0b in 2020 with online trades accounting for 47% in total trade value compared to 37% in the 2019. Given the risk of new wave of pandemic coupled with challenging vaccine distribution, trading interests in healthcare, technology and industrial products, and services are likely to be sustained in1H 2021.

Post-results, we raise our FY21E earnings by 33% as we raise our FY21E ADV to RM4.4b (from RM3.0b) with FY22E ADV coming in at RM3.6b. Our targeted payout ratio (c.92%) is maintained; thus, FY21E DPS is expected to be 40 sen. However, we do not rule out a consecutive special dividend payment ahead guided by previous years’ payout when Bursa performed exceptionally well.

TP revised with call maintained. With the revision in earnings, we raised our TP to RM9.65 (from RM9.00) as we applied its 5-year mean of PER of 22.1x to FY21E EPS of 43.6sen. Dividend yield is attractive at 4.3%. Given the volatility and expected volume tapering, we reiterate our MARKET PERFORM rating.

Source: Kenanga Research - 3 Feb 2021