• Stay BUY, with new MYR7.60 TP from MYR7.50, 12% upside and c.4% FY24F yield. Bursa Malaysia’s 9M23 core net profit was in line with our expectations. While securities trading activity could see a slowdown in the coming months on weakened sentiment of Asian and Malaysian equities, we see potential for a rebound heading into 2024. At the same time, BURSA’s non-trading revenue streams are continuing to build positive momentum.

• 9M23 results review. 9M23 headline net profit of MYR192.8m (+9% YoY) was broadly in line with our (79%), but beat consensus (82%) full-year forecasts. Operating revenue was flat YoY as softer market-related revenue (-3% for securities, -8% for derivatives) was offset by stronger market data revenue (+12%) and conference-related fees (+4x). On a quarterly basis, 3Q operating revenue grew 12% YoY (+10% QoQ) on the back of robust securities trading income (+26% YoY, +22% QoQ). Opex climbed 55% QoQ (+10% YoY) on an absence of one-off reversals, leading to softer headline PATAMI of MYR60.4m (-21% QoQ, +21% YoY). No dividends were declared during the quarter.

• Operational highlights. 3Q23 securities average daily value (SADV) of MYR2.24bn (+28% YoY, +18% QoQ) brought the 9M23 average to MYR2.14bn (-3% YoY). Derivatives trading was softer YoY in 9M23 – daily average contracts traded fell 5% to 74.3k, due to lower volatility in the prices of the FBM KLCI and crude palm oil. Elsewhere, 9M23 saw 25 new IPOs – BURSA is confident of ending the year on 31 IPOs. This is short of its target of 39, largely owing to lower-than-expected new Leading Entrepreneur Accelerator Platform (LEAP) market listings. Encouragingly, BURSA’s data business continued its strong growth momentum, adding 12% YoY in 9M23. The data business is now the third largest contributor to revenue, after securities and derivatives trading. During the results briefing, we were also guided for the group’s CIR to hover at 46-48% (9M23: 46%).

• Softening momentum? October’s SADV of MYR2.24bn (-7% MoM) could indicate a slowdown in trading momentum, which we suspect is due to weakened investor sentiment on Asian equities. Nevertheless, we expect trading activity to rebound moving into 2024, in line with RHB Economics’ view of improving growth in the Asian and domestic economies. Elsewhere, BURSA has stepped up efforts to encourage listings on the LEAP market, including publishing a new framework for transfers from the LEAP to the ACE market. In the meantime, the group is also exploring new products to be introduced via the data business and Bursa Carbon Exchange.

• We cut FY23F core profit by 2% as we factor in a softer IPO assumption of 31 (from 37). Still, we raise FY24F-25F by 2% as we lower our opex assumptions to better align with the CIR guidance. Our TP is raised slightly to MYR7.60 (from MYR7.50) and includes a 6% ESG premium.

Source: RHB Securities Research - 1 Nov 2023