BURSA's 9MFY24 results met expectations. Post slower Oct 2024 trading activities (ADV: RM2.50b), we believe markets would pick up meaningfully as investors are able to take position with better clarity. Maintain our TP of RM10.00 but upgrade to OUTPERFORM (from MARKET PERFORM), as its recent share price weakness presents an accumulation opportunity.

9MFY24 within expectations. BURSA's 9MFY24 net profit of RM241.2m made up 77% each of both our full-year forecast and consensus full-year estimates.

YoY, 9MFY24 operating revenue grew by 31% as both securities (+53%) and derivatives markets (+20%) saw trading revenues surging from better sentiment. We note that ADV for the period reported at RM3.36b (+66%). Overall, stripping one-off provisions made on past IT infrastructure led to core net profits of RM241.2m (+47%).

QoQ, attributed by more trading days (64 days, +5 days) during the period, 3QFY24 operating revenue and net profits both increased by 7%. This is in spite of a sequential decline in ADVs by 3%.

Highlights. Despite already having achieved more than 85% of its own PBT guidance, which it has retained, of RM361m-RM379m for FY24 at the 9M24 mark, our FY24F projection of RM434m is therefore higher than the company's guidance as we believe that ADVs could remain robust (with our full-year target of RM3.5b).

Although ADV numbers took a backseat in Oct 2024 at only RM2.50b, being the lowest monthly reading YTD, we believe this could be due to investors behaving conservatively as we approach the upcoming US Elections on 5 Nov 2024. While this translates to an ADV of RM4.4b in Nov and Dec 2024, we believe this is attainable as either outcome will translate to either a crowding out (Trump) or into (Harris) Malaysian equities. It is also below past US Election's ADVs of RM5.1b in Nov and Dec 2020.

Meanwhile, the group concurs with the opinion that the proposed 2% dividend tax will likely be a non-impact to trading activities, which we believe is due to it only targeting high net worth investors. With regards to the recent call to introduce a value up framework for the exchange, the group indicated a timeline has yet to be established but mulls the possible incentives through inclusion of new indices. Our FY25F ADV assumption stands slightly higher at RM3.6b with more IPOs (FY25 target at 50 from FY24's 42 IPOs) and sustained participation by foreign investors.

Forecast. Our FY24F-FY25F earnings were tweaked by +2.7%/-0.4% as we incorporate 3QFY24 numbers.

Maintain TP of RM10.00, based on an unchanged 25.0x PER, in line with its global financial exchange peers' average. Current rates 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 the local bourse, and (ii) its accelerating ROE in a market up-cycle thanks to its lean cost structure. There is no adjustment to our TP based on ESG given a 3-star rating as appraised by us (see Page 4).

Owing to share price weakness on the back of anticipated slowing of trading activities, we take this opportunity to upgrade our call to OUTPERFORM (from MARKET PERFORM).

Source: Kenanga Research - 1 Nov 2024