INVESTMENT HIGHLIGHTS

• Bursa’s FY16 PATAMI of RM193.6m (-2.5%yoy) came in line with our and consensus estimates

• 4QFY16 PATAMI was partially supported by the decline in opex despite lower top line numbers

• Pursuant to above, we make no changes to our existing forecast numbers at this juncture

• We maintain our NEUTRAL call at an unchanged TP of RM8.95 due to limited potential upside

In line. As expected, Bursa’s FY16 PATAMI of RM193.6m (-2.5%yoy) was within our and consensus expectations, which accounted 99% and 98% of our and consensus full-year estimate respectively.

4Q16 earnings were supported by lower opex. Despite Bursa’s top line number was lower at RM123.7m (-8.7%yoy) due to the decline in both securities and derivatives trading revenue of respective RM49m (- 18.1%yoy) and RM21.9m (-1.1%yoy), its PATAMI came in flattish at RM50.2m. This was partially supported by the decrease in staff costs to RM29.1m (-22.8%yoy) and other operating expenses (-7.7%yoy), due lower staff’s performance payout and lower headcount. As a result, its quarterly cost-to-income ratio and PATAMI margin improved to 44.3% (- 3.7ppts yoy) and 40.5% (+3.2%ppts yoy).

Higher dividend payout for 2016. Although its earnings performance was rather dull in 2016, it has still been able to pay a higher dividend payout. The Management has proposed a final single tier dividend of 17sen per share in respect of FY16. This brings total dividend of 34sen for FY16, which translate into payout of 94% (vs. 93% in FY15).

Impact on earnings. Pursuant to above, we retain our existing forecast numbers at this juncture on the expectation of earnings improvement of 6.6%. We anticipate its FY17 securities ADV traded (OMT) would come in at RM1.97b (vs. RM1.81b in 2016). This will be backed by higher securities market activities following favourable macro growth outlook and the return of foreign funds into local market thus far, albeit moderately. In addition, it is widely expected that an election will be held this year, which we have seen markets tend to perform well when the electorates go to the poll.

Recommendation. Having said that, we maintain our NEUTRAL call on Bursa at an unchanged TP of RM8.95 due to limited potential upside. We derive our valuation based on FY17F EPS of 38.9sen pegged to its 3-year quarterly historical average PER of 23x. We advocate investors to hold the stock due to attractive FY17 dividend yield of 4.0%

Source: MIDF Research - 6 Feb 2017