• Keep NEUTRAL and MYR6.80 TP, 1% upside with c.4% FY23F yield. Bursa Malaysia’s FY22 results are in line with our estimates. For FY23F, management expects trading-related revenue (c.60% of total operating revenue) to remain subdued, but has made strides to diversify non-trading revenue streams, with the Bursa Suq Al-Sila (BSAS) and data businesses showing promise. Currently trading at 23x forward P/E – in line with its five- year mean – we view the counter as fairly valued, for now.

• FY22 and 4Q22 results review. BURSA’s full-year net profit of MYR226.6m (-36% YoY) broadly met our/Street projections. As expected, operating revenue (-22% YoY) was brought down by softer securities trading income (-41% YoY), but the drop was mitigated by stronger derivatives income (+11% YoY). 4Q22 net profit of MYR49m dipped 2% QoQ (YoY: -25%), mostly due to higher opex (+9% QoQ, +3% YoY). Overall, FY22 ROE declined to 28%, from 40% in FY21. A final DPS of 11.5 sen was declared, bringing total DPS for the year to 26.5 sen (95% payout ratio).

• Operational highlights. 4Q22 saw a sequential rebound in SADV to MYR2.09bn (+19% QoQ, -21% YoY), largely driven by volatility from the 15th general election (GE15). For the full year, SADV was subdued at MYR2.18bn (-40% YoY) on weak market sentiment from the interest rate upcycle and increased geopolitical tensions. Elsewhere, the derivatives segment remained robust, with average daily contracts traded (ADC) recording a 5% YoY rise on higher FCPO trades. Other revenue items stayed flat YoY, but there were signs of strength in the BSAS (+18% YoY) and market data (+13% YoY) segments.

• FY23F guidance. BURSA provided analysts with a FY23F PBT target of MYR295-326m (FY22 achieved: MYR310m). The exchange kept a conservative stance on trading revenues, but is optimistic on growth in its data business. It is also targeting 39 IPOs in 2023 (FY22 achieved: 35). Around MYR70m in capex has been set aside for the year, of which 60% is to be allocated towards system upgrades for its new business ventures (eg Bursa Gold Dinar and Voluntary Carbon Market). Opex is expected to grow at a mid-single digit rate, led by staff costs.

• We lift FY23-24F forecasts by 3% as we factor in marginally higher SADV assumptions in line with our updated house views. We also introduce FY25F numbers in this report. We ascribe a 23x P/E (in line with the 5-year mean) to BURSA’s forward EPS to arrive at a TP of MYR6.80 (unchanged) – this includes an ESG premium of 4%, as per our in-house methodology. With no immediate catalysts for trading activity in sight and non-trading revenue growth expected to be decent at best, we deem the counter to be fairly valued presently.

Source: RHB Research - 2 Feb 2023