We  are  reiterating  our  BUY  call  on  Bursa  Malaysia  (Bursa)  with  a revised FV of MYR9.20 (from MYR8.10), after rolling forward valuations to  2014  (target  P/E  of  25x  unchanged).  Bursa’s  2Q13  results were slightly  ahead  of  our  and  consensus  expectations,  underpinned  by robust  topline  growth.  Dividends  also  surprised  positively  with  a special net DPS of 20 sen declared, on top of the interim net DPS of 16 sen.  

- Strong 2Q13 results. Bursa reported a strong set of numbers with 2Q13 net  profit  rising  45%  y-o-y  and  44%  q-o-q  to  MYR55m.  This  brought 1H13  net  profit  to  MYR93m  (+19%  y-o-y),  which  was  8%  ahead  of  our and 10% ahead of consensus full-year net profit estimates respectively, when  annualised.  Listing  revenue  was  stronger  than  expected, supported by a buoyant secondary issuance market. That said, we think Bursa’s quarterly net profit has peaked for the year and we expect softer earnings in the quarters ahead.  

- Result highlights. Positives were: i) 2Q13 ADT surged 39% q-o-q/57% y-o-y  to  MYR2.4bn  following  the  removal  of  the  election  overhang. Growth in ADT came from both retail and institutions (local and foreign), ii) 2Q13 turnover velocity improved to 37% (1Q13: 28%; 2Q12: 27%), iii) secondary  issuances  were  healthy  and  helped  cushion  the  softer  IPO market,  and  iv)  expenses  were  well  under control  (+3%  y-o-y;  -3%  q-o-q). Main negatives were: i) relatively weaker IPO market, as compared to 2012,  and  ii)  subdued  revenue  from  derivatives  trading  due  to  lower FCPO trades as CPO prices were rather stable during the quarter.

- Dividend.  Bursa  surprised  with  a  special  single-tier  DPS  of  20  sen,  in addition  to  an  interim  single-tier  DPS  of  16  sen  (2Q12:  13.5  sen,  net). We  have  included  the  special  dividend  in  our  forecast  and  retained  our recurring  dividend  payout  assumption  of  90%,  which  translates  into  a full-year net DPS of 50.3 sen (6.2% yield) for 2013.

- Forecasts. We  raised  our  FY13  net  profit  forecast  by  4%  to  reflect  the better-than-expected  listing  revenue  YTD,  but  leave  our  FY14  net  profit forecast relatively unchanged. 

- Valuation and recommendation. We have rolled forward our valuation base  to  2014,  resulting  in  a  revised  target  price  of  MYR9.20  (from MYR8.10).  Our  target  P/E  of  25x  (5-year  average)  is  unchanged. Reiterate BUY call.

Source: RHB