• Keep NEUTRAL, new MYR8 TP from MYR7.90 (7% upside), c.4% yield. As expected, Bursa Malaysia’s 1Q24 results were a slight beat, owing mostly to stronger-than-expected securities average daily value (SADV). For 4M24, SADV stood at a supernormal MYR3.2bn, from which, out of conservatism, we forecast a healthy moderation. We maintain our rating as the positives from the stronger securities market performance appear to be priced in. Ongoing geopolitical tensions present a downside risk to market sentiment.

• Results review. BURSA posted 1Q24 net profit of MYR75.0m (+34% YoY, +26% QoQ) – this beat both RHB and consensus’ earnings forecasts. The deviation from our numbers mainly came from stronger operating revenue (+20% YoY, +20% QoQ) as both the securities and derivatives markets performed better than expected. Other revenue items (eg depository and data services) also showed commendable YoY growth. Opex growth of 9% YoY (+3% QoQ) was below management’s initial 10-15% guidance for the year, though spending tends to pick up in 2H.

• Operational highlights. SADV traded reached MYR3.18bn, up 40% YoY (QoQ: +17%). We believe this reflects renewed optimism in the domestic equities market from local and foreign investors after two relatively soft years in 2022 and 2023. The derivatives market also performed decently, with derivatives average daily contracts (DADC) traded reaching 84k units, up 22% YoY (QoQ: +18%) in 1Q24, thanks to better trades of both the KLCI and CPO futures. The data business also raked in revenue of MYR19m (+18% YoY, +12% QoQ) after a round of fee revisions. A key growth lever for the data business in 2024 is the central sustainability intelligence (CSI) platform, to launch within 1H24.

• Minimal changes to FY24 targets. BURSA kept all its headline key performance indicators for FY24 despite the promising start to the year. We still consider the PBT target of MYR293-323m to be rather conservative, especially given the continued robustness in securities market activity in Apr 2024. Elsewhere, management tweaked its opex guidance – instead of aiming for 10-15% absolute opex growth, it now aims to keep CIR below 50%. In our view, this implies that the group could frontload several cost items (eg IT investments, headcount hires for new businesses) if income growth pans out better than expected.

• We raise our earnings forecasts by 1-2% as we factor in more optimistic SADV and DADC assumptions, though offset by higher opex estimates. Our SADV forecast for 2024 is now MYR2.8bn (from MYR2.7bn), which is still conservative vs the 4M24 level of MYR3.2bn. Our TP, based on a 22.5x P/E target on FY24F EPS, is raised to MYR8, and includes a 6% ESG premium.

Source: RHB Research - 2 May 2024