We maintain our MP call and TP of RM10.00. 3QCY24 ADV of RM3.52b is within our expectation, leaning into to an earnings range of RM75m-RM80m for BURSA's 3QFY24 reporting. Keeping the market vibrant are: (i) returning foreign participation, (ii) multi-year projects, (iii) strengthening MYR heading to position with net beneficiaries, and (iv) post-Budget 2025 clarity. Our ADV outlook for FY24F/FY25F remains unchanged at RM3.5b/RM3.6b.

3QCY24 ADV at RM3.52b (-3% QoQ, +66% YoY). The period's ADV was in line with our expectations, arriving at 9M-YTD ADV of RM3.36b. The quarter's performance was fuelled by continued thematic plays from: (i) data centre developments (construction and property counters) and their beneficiaries (utilities), (ii) state-driven prospects (i.e. Johor, Sarawak) as well as (iii) foreign investors flowing back into Malaysian equities in favour of a stable interest rate environment amid regional monetary policy easing. We opine the sequential softening is explained from heavier news flows in 2QCY24.

Interest in Malaysian equities could sustain. We reckon the abovementioned prospects will carry on for the rest of the year, particularly with expectations that further interest rate cuts would fuel further crowding into our local bourse. On the backdrop of the MYR's appreciation, investors may position themselves with net importers that are slated to see cost savings in the coming quarters. Meanwhile, the Budget 2025's unveiling on 18 Oct 2024 should provide clarity on certain issues such as the further rationalisation of fuel subsidies can allow investors to position better.

All in, we opine this could drive 4QFY24 ADV to reach RM3.8b to support our full-year ADV assumption of RM3.5b. For FY25, our ADV assumption is unchanged at RM3.6b.

Stepping up the game. With 39 IPOs out of 42 targeted for FY24 already met, BURSA believes it could well achieve up to 50 in FY25, encompassing heavyweight sectors such as healthcare and telecommunications. We believe this could be stimulated by the more robust trading environment and participation which could encourage corporates that fairer valuations could be met. Meanwhile, the group is mulling on a formalised framework where listed companies may be given fundamentals targets on measures such as valuations, return on equity and liquidity as a bid to improve the overall quality of Malaysian equities to better attract investors.

Forecast. Post update, our FY24F earnings is slightly tweaked (-2%) from recent ADV inputs. With regards to the upcoming 3QFY24's results, we project the supportive ADVs to bring earnings to between RM75m-RM80m (which reflect a 4% decline QoQ and a 28% increase YoY).

Maintain MARKET PERFORM and TP of RM10.00. Our TP is based on an unchanged 25x PER on FY25F EPS of 40.1 sen, in line with its global financial exchange peers' average which have also seen appreciation in valuations. Current valuations are also akin to pandemic levels (25x-26x PER), which we believe could be reflective of similar sentiment in line with heightened trading activities.

We also like BURSA as: (i) it serves as a proxy to participation in our local bourse, and (ii) its ROE accelerates in a market upcycle thanks to its lean cost structure.

Risks to our call include: (i) lower-than-expected trading volume in the securities and derivatives markets, (ii) higher-than-expected opex, and (iii) fewer initial public offerings.

Source: Kenanga Research - 7 Oct 2024