BURSA’s 1QFY24 results met expectations. We anticipate stronger comparative ADV in CY24 thanks to a more favourable trading environment. That said, we believe the positive landscape could have been priced in. We keep our forecasts relatively unchanged and maintain our TP of RM6.70 and UNDERPERFORM call.

1QFY24 within expectations. BURSA’s 1QFY24 net profit of RM75.0m made up 28% of our full-year forecast and 29% of consensus full-year estimate.

YoY, 1QFY24 operating revenue rose by 20% mainly thanks to stronger trading revenue from securities market, elevated by ADV of RM2.93b (1QFY23: RM2.14b). While operating expenses did increase, cost-to-income ratio improved to 46.5% (-4.7ppts) following the higher top line performance. All in, this led to 1QFY24 net earnings to report at RM75.0m (+34%).

QoQ, 1QFY24 operating revenue expanded by 20% for similarly stronger comparative ADV (4QFY23: RM2.16b). This then translated to a 35% growth in core profits, adjusting for 4QFY23’s reversal of provisions.

Outlook. In spite of the earnings reporting in favourably, the group conservatively maintain its pretax profit target of RM293m-RM323m, which we believe could be easily achieved. We anticipate the trading environment for CY24 to be upheld by: (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). Our full-year ADV projection stands at RM2.70b, which reflects some easing in activities from 1QCY24’s higher base as we anticipate some cooling off in foreign interest during the mid-year period.

Forecast. Relatively unchanged.

Maintain UNDERPERFORM and TP of RM6.70. Our TP is based on an unchanged 20.0x PER, in line with its global financial exchange peers’ average, and pre-pandemic valuations. This is against our FY25F EPS of 33.5 sen. 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 (see Page 4).

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 - 2 May 2024