KUALA LUMPUR (July 31): Investment analysts have raised their earnings forecasts for Bursa Malaysia Bhd (KL:BURSA) on the back of improved trading volume after the stock exchange operator’s second-quarter results exceeded their expectations.

TA Securities Research said in a note that it has revised its securities trading velocity assumption to 38% for the financial year ending Dec 31, 2024 (FY2024) to FY2026, compared to the previous estimate of 32%.

It consequently adjusted its net profit projections to RM316.1 million for FY2024 from the earlier estimate of RM272.4 million, RM337.8 million for FY2025 from RM291.5 million previously, and RM359.7 million for FY2026 from RM308.4 million.

The research house also raised Bursa Malaysia’s target price (TP) to RM10.70 (from RM8.20), implying an FY2025 price-earnings ratio of around 24.5 times and a 3% environmental, social, and governance (ESG) premium. It reiterated its ‘buy’ recommendation on the stock exchange operator.

MIDF Investment Bank, meanwhile, attributed Bursa Malaysia’s strong trading volume to expectations of US Federal Reserve rate cuts, which have led to a “risk-on” mode in global markets. It revised its earnings forecasts upwards by 13% for FY2024 and by 15% for FY2025 amid better-than-expected revenue and raised its TP to RM9.30 (from RM8.20).

“In the short term though, the ongoing global and local developments will continue to influence the volatility and performance of the securities and derivatives markets, [on] which, at [the] current juncture, we are sanguine. However, we believe that the positives have been largely priced in, with valuations slightly stretched. Hence, we are downgrading our recommendation to 'neutral' (previously 'buy'),” said the research house.

On Tuesday, Bursa Malaysia reported that its results for the second quarter ended June 30, 2024 (2QFY2024) hit a three-year high of RM80.45 million (compared to RM76.25 million a year earlier), bringing first half ended June 30, 2024 (1HFY2024) net profit to RM155.48 million. The company declared an interim dividend of 18 sen per share, higher than 15 sen per share in 2QFY2023.

According to Bloomberg consensus, Bursa Malaysia is expected to register a net profit of RM307.39 million on revenue of RM745.47 million for FY2024. For FY2025, its net profit is expected to rise further to RM319.38 million on revenue of RM776.6 million.

RHB Investment Bank, on the other hand, assumes no special dividends from Bursa Malaysia at this juncture.

“We still like Bursa as a proxy to the strong securities market, and are positive on the group’s efforts towards diversifying its offerings beyond traditional trading products,” it said. RHB kept its ‘buy’ call on Bursa Malaysia and TP of RM11.25.

At 10.34am on Wednesday, Bursa Malaysia shares declined by 22 sen or 2.24% to RM9.58. Out of the 16 analysts tracking the stock, 10 have ‘buy’ calls while the remaining six have ‘hold’ calls, with a 12-month TP of RM10.18. 

https://www.theedgemarkets.com/node/721069