• Stay BUY, with new MYR11.25 TP from MYR9.85, 13% upside and c.4% yield. We think Bursa Malaysia could post 2Q24 net profit of MYR75-85m, underpinned by robust securities and derivatives market performances. We think such performances can continue given expectations of further structural reforms and positive domestic-centric news flow.

• Strong revenue momentum continues. 2Q24 SADV reached MYR3.9bn, up 22% QoQ and doubled YoY. This brought 1H24 average to MYR3.5bn, an increase of 68% YoY and ahead of our initial 2024 SADV assumption of MYR3.2bn. We see minimal risk of a slowdown in trading activity – in fact, ongoing geopolitical developments (eg Middle East tensions, US elections) could induce further volatility in the domestic equity market. On the derivatives front, derivatives daily average contracts (DADC) in 2Q24 stood at 85.6k (+2% QoQ, +10% YoY), bringing the 1H24 average to 84.9k (+14% YoY). We infer that 2Q24 BURSA’s revenue could reach c.MYR200m (+7% QoQ, +38% YoY), implying a robust 1H24 revenue increase of c.29% YoY.

• To undershoot opex guidance? Recall that in the 1Q24 results briefing, management had guided for 50% CIR while maintaining its MYR293-323m PBT target for the year. Given the stronger-than-expected income in YTD- 2024, we think the group could undershoot the 50% and perhaps track closer to the 1Q24 level of 47%. Taken together with our revenue estimates, we think BURSA could record 2Q24 net profit of MYR75-85m, bringing the 1H24 total to MYR150-160m, ie ahead of our and Street’s initial estimates.

• How much special DPS could BURSA offer? Earlier, we had flagged that BURSA has a track record of paying out special dividends in record-high SADV years (ie 2017, 2018, 2020). Based on our analysis, we think the group has capacity to pay out up to MYR70m in special dividends in FY24F, translating to 9 sen/share or an additional 0.9% yield. However, there has not been any explicit indication from management on whether there will be special dividends in FY24F.

• Changes to forecasts. We raise our FY24F-26F SADV by 9-15% – our FY24F SADV of MYR3.7bn implies an SADV acceleration in 2H24 to MYR3.9bn. We also raised our DADC estimates by 2-4%, in line with the 1H24 performance. As a result, our net profit estimates are revised by 7-13%. We assume no special dividends at this juncture.

• Stay BUY. Post-earnings adjustments, our TP is raised to MYR11.25, based on an unchanged 26.5x P/E target on FY25F EPS (rolled forward), and includes a 6% ESG premium. While the share price has risen 44% YTD, we think continued securities market strength along with the potential announcement of special dividends could provide further uplift.

Source: RHB Research - 23 Jul 2024