Bursa’s 3Q13 net profit eased 16% q-o-q due to softer average daily value (ADV) in the securities market, but this was largely anticipated as 2Q13 ADV was boosted by the buoyant investor sentiment post-general election. Our earnings forecasts and MYR9.20 FV (25x 2014 EPS) are unchanged. Bursa is a beneficiary of the ongoing rollout of the Economic Transformation Programme. Maintain BUY.

- Softer 3Q13 results as expected. Bursa reported 3Q13 net profit of MYR46m (+27% y-o-y; -16% q-o-q), which was within expectations with 9M13 net profit of MYR139m (+21% y-o-y) accounting for 78% of our and consensus full-year estimates. As mentioned in our previous report, Bursa’s 2Q13 quarterly net profit had likely hit its peak for the year and we had expected softer earnings in the quarters ahead.

- Results highlights. Bursa’s 3Q13 net profit fell 16% q-o-q, following softer ADV of MYR2.1bn during the quarter (2Q13: MYR2.4bn) and consequently, lower securities market revenue (-12% q-o-q). This was not too surprising as 2Q13 earnings were mainly boosted by buoyant investor sentiment post the general election. That said, 3Q13 ADV was still healthy vs 3Q12’s MYR1.7bn, aided by volatile market conditions caused by uncertainties surrounding the US Fed’s potential QE tapering. Revenue from the derivatives market was largely stable q-o-q but up 11% y-o-y due to improved derivatives market activities for both the FCPO and FKLI contracts. Meanwhile, operating expenses remain under control (+9% y-o-y; +5% q-o-q), with the y-o-y rise mainly attributed to higher staff costs to build capabilities and capacity.

- Forecasts. We leave our earnings forecasts unchanged.

-Valuation and recommendation. We retain our MYR9.20 FV, which is based on a target 2014 P/E of 25x (5-year average). Bursa is a proxy and a likely beneficiary of the ongoing rollout of the Economic Transformation Programme, in our view. Meanwhile, on the retail front, macro factors look positive thanks to the country’s young, growing workforce as well as high savings rate. This could be further boosted if foreign retail participation picks up following the launch of the Asean Trading Link, although we see this as a longer-term positive. Finally, we see the possibility of further special dividends. Reiterate BUY.

Source: RHB