KUALA LUMPUR (Nov 1): Analysts said Bursa Malaysia Bhd's earnings for the nine-month period ended Sept 30, 2023 (9MFY2023) were in line with their expectations, adding that they expect the average daily trading volume (ADTV) to improve in the fourth quarter and heading into 2024.
Bursa's 9MFY2023 net profit rose 8.59% year-on-year (y-o-y) to RM192.83 million, due to a one-off reversal of provisions. Revenue for the period was largely flat at RM459.8 million.
The bourse operator and regulator's net profit for the third quarter ended Sept 30, 2023 (3QFY2023) rose 20.5% y-o-y to RM60.41 million, on the back of improved trading revenue from the securities market. Quarterly revenue rose 13.07% to RM158.71 million.
In a note on Wednesday, CGS-CIMB said a rebound in equity ADTV lifted Bursa's 3QFY2023 results, and attributed the higher equity ADTV, which rose by 31.2% y-o-y and 19.4% quarter-on-quarter to RM2.1 billion, to improved market sentiment following the state elections on Aug 12, and the launch of the Madani Economy framework by the unity government.
CGS-CIMB maintained its "hold" call on Bursa, and raised its dividend discount model-based target price (TP) for the stock to RM6.90, from RM6.57 previously, saying it expects the ADTV of the equity market to improve in the fourth quarter and 2024.
It also projected an ADTV growth of 7.6% in 2024, and that the stock is supported by an attractive FY2023 dividend yield of 4.4%.
RHB Investment Bank Research (RHB IB), meanwhile, kept its "buy" call on Bursa, with a higher TP of RM7.60 (from RM7.50), based on a 12% upside and about 4% FY2024 yield.
"While securities trading activity could see a slowdown in the coming months on weakened sentiment of Asian and Malaysian equities, we see potential for a rebound heading into 2024," it said.
It also pointed out that Bursa’s non-trading revenue streams are continuing to build positive momentum.
Kenanga Research, on the other hand, maintained its "market perform" call on Bursa, and kept its TP for the stock at RM6.25, based on an unchanged 20 times FY2024 price-earnings ratio, in line with global financial exchange peers’ average, and pre-pandemic valuations.
"Risk-reward ratios appear fair with the lack of strong medium-term catalysts to deliver earnings surprises cushioned by Bursa's solid return on equity and stable dividend prospects," the research house said.
RHB IB cut its FY2023 core profit forecast for Bursa by 2%, as it factored in a softer assumption of 31 initial public offerings, from 37 previously.
"Still, we raise our FY2024-25 forecasts by 2%, as we lower our operating expenditure assumptions to better align with the cost-to-income ratio guidance," it said.
CGS-CIMB, meanwhile, expects strong y-o-y net profit growth in 4QFY2023, mainly due to a low base from 4QFY2022.
"We project net profit to rise 44.4% y-o-y to RM70.7 million in 4QFY2023, based on our expectations of RM2.1 billion-RM2.2 billion equity ADTV in the fourth quarter," it said, noting that the equity ADTV stood at RM1.94 billion in the fourth quarter last year.
Meanwhile, Kenanga left its forecasts relatively unchanged.
It anticipated the ADV to come close to RM2.4 billion in the fourth quarter and throughout 2024.
"With some clarity from the measures in the recently [announced] Budget 2024, local and foreign investors may be more willing to resume market participation.
"We also expect flattish interest rates for the overnight policy rate and US Federal Reserve rates throughout 2024, which may dilute interest in money market products, and hence resulting in a reversion back to equity and derivative securities," it said.
At the midday break on Wednesday, Bursa had fallen 13 sen or 1.91% to RM6.66 a share, with a market capitalisation of RM5.39 billion.