KUALA LUMPUR: Bursa Malaysia Bhd is expected to post better performance in financial year 2024 (FY24), following modest average daily trading value (ADV) in FY22 and FY23 at RM2.07 billion and RM2.06 billion respectively.

Hong Leong Investment Bank Bhd (HLIB) said the better performance will be driven by two factors externally and domestically. 

"Externally, the anticipated end to the Federal Reserve's rate upcycle and an eventual pivot (predicted around mid-2024). 

"Domestically, the reduction of political risk premium has affected the local stock market over the past two years, particularly due to the general election 15 (GE15) in November 2022 and six state elections in August 2023. 

"The next GE16 isn't scheduled until the end of 2027 or early 2028," it said in a note. 

HLIB added that while still in its early stages, the ADV for FY24 is off to a good start, with January's figure reaching RM3.2 billion, marking the third consecutive month-on-month increase. 

HLIB maintained a "Neutral" rating on Bursa with an unchanged target price of RM7.12. 

"Although the ADV outlook has improved, we feel that this positive development has already been factored into the market, given that Bursa Malaysia's one-year forward rolling price-to-earnings (PE) ratio stands at 24.2 times, representing a deviation of +1.2 standard deviations from the norm. 

"This valuation aligns closely with the five-year average multiple of its regional peers, which is at 25.2 times," it noted. 

Bursa reported a full-year 2023 core profit after tax and minority interest (PATMI) of RM221 million, representing a two per cent year-on-year (YoY) decrease.

HLIB said this aligned with its "Hold" expectations (99 per cent) but slightly missed consensus estimates (94 per cent).

It added that the marginal decline in core earnings was attributed to a relatively unchanged top-line (+1 per cent) coupled with increased operating expenses (+11 per cent), resulting in a rise in the cost-to-income ratio from 50 per cent to 55 per cent.

Bursa's net profit rose 11.39 per cent to RM252.38 million in the financial year ended Dec 31, 2023 (FY23) on higher operating revenue.

The stock exchange posted a net profit of RM226.57 million in FY22.

Its revenue was up to RM616.49 million from RM603.25 million in the year before.

In the fourth quarter of FY23, Bursa registered almost 22 per cent increase in net profit of RM59.55 million on higher trading and non-trading revenue.

Revenue, meanwhile, was RM156.68 million, up from RM145.7 million in 4Q22.

https://www.nst.com.my/business/corporate/2024/02/1008839/stronger-bursa-malaysia-fy24-after-two-years-modest-performance