We maintain our UP call but raise our TP to RM6.70 (from RM6.45). 1QCY24 average daily value (ADV) was better-than-expected on the back of higher trading sentiment in the local bourse. Anticipating positive momentum to be more supportive than CY23, we raise our ADV assumptions for CY24/CY25 to RM2.70b/RM2.75b (from RM2.40b/RM2.50b). This translated to stronger projected earnings, adjusting our FY24F/FY25F earnings by +6%/+4%.

1QCY24 ADV at RM2.92b (+35% QoQ, +36% YoY). While the period seems to be stronger compared to past years’ low bases, ADV did come in stronger than expected against our earlier anticipated RM2.40b for the quarter. Stronger trading interest likely stemmed from expectations for: (i) more relaxed monetary policies globally, (ii) stronger recovery in exporting segments, and (iii) upbeat prospects in several strategic projects (i.e. data centres, mega infrastructure projects).

Better flows for 2024. We opine that the above themes could continue to drive trading sentiment for the remainder of the year. The biggest factor to cause a pause could be uncontrolled inflation from the upcoming targeted fuel subsidies, albeit its likely implementation in 2HCY24 may only translate to material impacts in CY25, if any. Street expectations on global interest rates are skewed to the downside. Disappointments from this could prove a surprise to trading markets as well but we do believe that it is also unlikely given a more dire need to stimulate growth throughout.

Forecast. Post update, we relook our ADV assumptions for the remainder of CY24/CY25. Following the more supportive ADVs now seen, we raise our ADV outlook to RM2.70b/RM2.75b (from RM2.40b/RM2.50b, respectively). This translates to a 6%/4% increase to earnings.

With regards to 1QCY24’s upcoming core earnings, we project earnings to possibly report between RM70m-RM75m (which is stronger on both QoQ and YoY basis by c.30%, in line with the better ADV numbers).

Maintain UNDERPERFORM with a higher TP of RM6.70 (from RM6.45). We raise our TP based on our revised FY25F EPS of 33.4 sen against an unchanged 20.0x PER, in line with its global financial exchange peers’ average, and pre-pandemic valuations. Risk-reward ratios appear fair with the lack of strong medium-term catalysts to deliver earnings surprises cushioned by its solid ROE and stable dividend prospects. There is no adjustment to our TP based on ESG given a 3-star rating as appraised by us.

Risks to our call include: (i) higher-than-expected trading volume in the securities and derivatives markets, (ii) lower-than-expected opex, (iii) more-than-expected initial public offerings, and (iv) higher-than- expected dividend payout.

Source: Kenanga Research - 15 Apr 2024