Bursa’s FY15 net profit of MYR199m was in line. Maintain NEUTRAL, while we lift our TP to MYR9.00 (from MYR8.40, 7% upside) as we roll over our valuation to 21x FY17F EPS (from 21x FY16F EPS). Whilst its SADV of MYR2.08bn was down 4% YoY, this weakness was offset by derivatives average daily contracts rising 13% to 57,157. We forecast marginal volume increases for both the securities and derivatives markets in FY16.

Securities market turnover muted. Bursa Malaysia’s (Bursa) FY15 securities average daily value (SADV) of MYR2.08bn was down a marginal 4% YoY. Falling crude oil prices and the sharp MYR depreciation contributed to a weak securities trading environment. As pure securities trading revenue accounts for 48% share of total revenue, the impact on overall revenue is significant.However, Jan 2016’s SADV of MYR2.03bn (excluding married deals) was encouraging. We assume marginal growth in trading volumes and have factored in FY16 and FY17 SADV assumptions of MYR2.18bn and MYR2.29bn respectively.

FKLI contracts traded surged. Derivatives average daily volume rose 13% YoY to 57,157, with 78% of the contracts traded comprising FCPO contracts. The growth in derivatives contracts traded came from the 39% surge in FKLI contracts (21% of contracts traded). For FY16, we assume that its derivatives average daily volume will increase 9% YoY to 62,301 contracts. Its derivatives share of overall revenue is at a significant 18%.

Operating expenses rose a marginal 3% YoY, and cost to income ratio is unchanged, at 46%. The ability of Bursa to control its costs is a big positive. Respectable dividend yield. Bursa declared a FY15 dividend of 34.5 sen per share (including the final dividend of 18 sen), lower than FY14’s 54 sen (which includes a special 20 sen dividend). While it has a policy of paying at least 75% of PATAMI as dividends, its actual payout has been more than 90%. We are forecasting FY16 dividend of 39 sen, implying a respectable yield of 4.6%.

Valuations. With no catalyst in sight, we maintain our NEUTRAL call. Our TP is raised to MYR9.00, pegged to 21x FY17F EPS (-1SD from the 5-year historicalaverage of 25x). We also roll over our valuation from 21x FY16F EPS. We use DCF as a secondary valuation methodology – which yields a close MYR8.89TP.