KEY INVESTMENT HIGHLIGHTS

• 9MFY19 PATAMI within ours and consensus’ expectations

• Main drag to earnings were the lower revenue from securities and derivatives trading

• Lower institutional and retail trades affected securities trading revenue, while the derivative market saw decline in contracts traded

• Islamic capital market remains stable

• No change to earnings forecast

• Maintain NEUTRAL with TP: RM6.50

Within expectations. Bursa posted its 9MFY19 PATAMI which was in line with ours and consensus’ expectations at 70.8% and 71.8% of respective full year estimates. Lower revenue was the main contributor of the -18.5%yoy decline in PATAMI.

Securities and derivatives trading revenue were main drag.Operating revenue fell -11.1%yoy in 9MFY19. The revenue was weighed down by lower securities and derivatives trading revenue which fell - 16.4%yoy and -10.1%yoy respectively. The ADV-OMT continued its downtrend with -22.6%yoy to RM1.98b in 9MFY19, due to lower institutional and retail trades. Meanwhile, for derivative market, ADC fell -5.6%yoy to 52,644 attributable to lower number of FCPO and FKLI contracts traded. This was the result of low CPO prices and lower FBMKLCI volatility respectively.

Islamic capital market remain stable. BSAS trading revenue grew +2.7%yoy due to higher ADV from domestic trades. The BSAS ADV for 9MFY19 grew +47.1%yoy to RM31.6b. We expect the momentum for this segment will continue to be robust in coming quarters.

Cost well contained. One of the bright spot was that Bursa managed to maintain cost downtrend. Operating expenses fell -2.1%yoy due to decrease in staff cost from lower provision of variable cost, and lower depreciation & amortization. Globex fees were also lower due to lower number of derivatives contracts traded.

Earnings estimates. Given that the results were within our expectations, we make no changes to our earnings forecast.

Recommendation. The uncertainties surrounding the global economy continue to have an effect to Bursa’s earnings. We believe that these external uncertainties will not dissipate in the near future. Therefore, we believe that Bursa’s prospect remains unexciting. We maintain NEUTRAL call on Bursa with revised TP of RM6.50. Our TP is based on pegging FY20 EPS to a lower PER of 22x.

Source: MIDF Research - 30 Oct 2019