• Keep BUY and MYR11.25 TP, 15% upside with c.4% FY24F yield. Bursa Malaysia’s 1H24 net profit of MYR155.5m is in line with our and consensus full-year projections. At half time, the group’s financial performance has comprehensively beaten its initial PBT target, which we suspect was due to a stronger-than-expected securities market performance. As such, management has revised its PBT target upwards, although it is still fairly conservative, in our view.

• Results review. 2Q24 net profit of MYR80.4m (+6% YoY, +7% QoQ) brought the 1H24 total to MYR155.5m (+17% YoY), forming 49% and 52% of our and consensus full-year estimates. As expected, 2Q24 total income came in just under MYR200m (+38% YoY, +7% QoQ) after a robust showing from both the securities and derivatives markets. Other revenue items – especially the market data business – also showed positive YoY and QoQ growth. Opex was also well-contained, with the 2Q24 and 1H24 CIR tracking below management’s initial 50% target. An interim DPS of 18 sen was declared, translating to a 94% payout ratio (1H23: 92%) and c.2% yield.

• Operational highlights. 1H24 SADV stood at MYR3.5bn (+69% YoY) while derivatives average daily contracts (DADC) soared 14% YoY to 85k contracts – both are record highs for 1H, excluding the pandemic years. The group is also holding on to a cash pile of MYR490m, the highest level since the end of the pandemic. Management indicates that it intends to preserve some cash for acquisitions to complement its existing market data business, and that it deems MYR350m to be an optimal cash level. Assuming no acquisitions are made this year, the optimal cash level could allow BURSA to pay out MYR70m in special dividends, or 9 sen per share/+0.9% yield.

• Outlook. Post-1H24 results, BURSA raised its PBT target for FY24F to MYR361-379m from MYR273-323m. We note that this bakes in a fair amount of conservatism, given the uncertain market reactions expected from ongoing geopolitical developments, namely the Middle East conflict and the upcoming US elections. However, the group sees upside potential coming from its strong IPO pipeline as well as continued securities market strength. Management expects SADV to continue hovering above MYR3bn, and 2H24 DADC to be flat HoH.

• No changes to forecasts as results are in line. Our FY24F PBT estimate of MYR421m, which assumes a slight HoH acceleration in SADV, is higher than management’s conservative target. We assume no special dividends 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. Our TP is based on an unchanged 26.5x P/E target on FY25F EPS and includes a 6% ESG premium.

Source: RHB Research - 31 Jul 2024