9MFY21 PAT of RM290.3m is deemed above our (at 80%) and consensus’ (at 84%), expectation. We expect sequential 4QFY21 earnings improvement as ADV picks up post-budget announcement. However, we think the higher stamp duty and prosperity tax (Budget 2022) could spark a selloff in the market. Raise FY21E PAT by 3%, but cut FY22E PAT by 7% on higher ETR and lower FY22E ADV. Downgrade to MP with a lower TP of RM7.60 (from RM8.20) @FY22E PER of 20x (-1.0SD from mean). Dividend yield of 5-6% provides a safety net.

Deemed above expectations. We deem 9MFY21 PAT of RM290.3m (+6% YoY), as above both our (80%) and consensus’ (84%), expectations on higher- than-expected 9MFY21 Average Daily Trading Value (ADV) RM3.90b (vs. our expected RM3.7b). Absence of DPS is within expectation.

Results’ highlight. YoY, 9MFY21 PAT rose (+6%) in line with a 7% improvement in operating revenue largely from higher stable revenue (21%) from better: (i) listing & issuer services (+30%) as funds raised from new listings and secondary market grew 375% (number of new listings grew to 24 from 13 in 9MFY20), and (ii) depository services (+29%) on higher ROD (record of depository) fees which typically tracks number of corporate exercises. This was despite lower new CDS account opening of ~288k (-9%) in 9MFY21. QoQ, 3QFY21 PAT fell (-10%) as securities trading revenue declined (-19%) mainly on lower ADV (-23%) of RM2.9b.

Potential post-Budget trading interest. While average MTD (October) ADV slipped slightly (-1% QoQ) to RM2.87b, we expect ADV to improve in 4QFY21 as trading activities pick up post-Budget announcement. As such, we expect a slight sequential improvement in 4QFY21. That said, we think the prosperity tax and higher stamp duty of 0.15% (from 0.1%) with the removal of the RM200 cap proposed in Budget-2022 could bring about a selloff in the equity market, dragging Bursa’s share price.

Raise FY21E PAT by 3% on higher FY21E ADV of RM3.8b (vs. RM3.7b). However, we reduced FY22E PAT by 7% on higher ETR of 31% (from ~25%) imputing the prosperity tax lower FY22E ADV of RM3.0b (from RM3.3b) from higher stamp duty.

Downgrade to MARKET PERFORM with a lower TP of RM7.60 (from RM8.20) post-earnings adjustment based on FY22E PER of 20x (-1.0 SD from mean). Presently, BURSA is traded at FY22E PER of 19.7x, implying close to -1.0SD valuation which we think is justified given a potential selloff due to Budget- 2022’s higher stamp duty and prosperity tax. FY21-22E dividend yields of 5.6- 4.8% provide a safety net.

Source: Kenanga Research - 1 Nov 2021