INVESTMENT HIGHLIGHTS

• Bursa Malaysia (Bursa) is going to release its 4QFY16 results on 3rd February 2017

• The results would be lower due to weaker trading activities in both securities and derivatives markets

• We retain our existing forecast numbers at this juncture as the decline has already been expected

• Hence we maintain our NEUTRAL recommendation with an unchanged TP of RM8.95

FY16 earnings to fall within our estimate. Bursa is expected to release its 4QFY16 results on 3rd February 2017. We expect its 4QFY16 PATAMI to come in between RM41m and RM42m, which would see a respective decline of -17.9%yoy and -5.6%qoq. Cumulatively, the PATAMI of RM185m (-10.4%yoy) is still expected to fall within the proximity of our FY16 earnings estimates of RM195.8m.

Securities ADV traded (OMT) hits lowest level since 2012. We gather that securities ADV traded (OMT) in 4QFY16 has fallen sharply to the lowest level of RM1.66b (-18.4%yoy and -3.5%qoq) since 4QFY13 of RM1.67b, with a velocity of 25% only. Meanwhile, its cumulative securities ADV traded of RM1.79b (-9.2%yoy) hits lowest level since 2012 of RM1.56b. The downturn was dragged by lower ADV traded of RM1.43b for the month of December 2016 due to long year-end holiday. It was also attributable to a substantial amount of foreign net outflow in that particular quarter, having seen net foreign ownership declined to 22.3% in 4QFY16 from 22.8% in 3QFY16. We estimate its revenue from securities trading activities would plunge to RM50.1m (-16%yoy and - 2.1%qoq) in 4QFY16. On listings fee income, it is expected to be lower in 4QFY16 based on the size of fund raised of circa RM4.8b against RM8.2b in 4QFY15.

Dull derivatives trading activities. We note that derivatives ADC traded has slightly dropped to 55,075 contracts (-1.4%yoy and - 2.0%qoq) in 4QFY16 from 55,883 and 56,222 contracts in 4QFY15 and 3QFY16 respectively. We opine this was due to flattish trading activities in both FKLI and FCPO markets at ADC traded of 10,576 (-12.5%yoy) and 44,500 (+1.6%yoy) following a festive season. We estimate its revenue from this segment would be around RM20.5m (-6.8%yoy and - 1.4%qoq) in 4QFY16.

Impact on earnings. We retain our existing forecasts numbers at this juncture as we expect the results would come in line with our estimates.

Recommendation. Accordingly, we maintain our NEUTRAL recommendation with an unchanged TP of RM8.95. Our valuation based on FY17F EPS of 38.9sen pegged to its 3-year quarterly historical average PER of 23x.

Source: MIDF Research - 20 Jan 2017