KUALA LUMPUR (April 19): Bursa Malaysia Bhd’s core net profit may have risen 34% in the first quarter, from a year earlier, on higher securities and derivatives trading activity when the exchange operator reports its results, Hong Leong Investment Bank said.

Core net profit could come in at RM75 million in the three months ended March 31, 2024 and account for 30% of the research house’s full-year forecast and 29% of consensus, Hong Leong said in a note to clients. Bursa is slated to release its 1Q results on April 30.

Bursa’s securities average daily value (ADV) surged 35.6% quarter-on-quarter and 36.7% year-on-year to RM2.9 billion in 1Q, Hong Leong noted but flagged “some sequential softening” in the next two quarters.

Delay in US rate cuts may dent risk appetite for emerging markets including Malaysia, Hong Leong said. The house raised its target price to RM7.36, from RM7.12, but maintained its “hold” call.

Hong Leong’s expectations for Bursa Malaysia mirrors broader caution among analysts. The stock has six “hold” ratings, three “sell” recommendations and six “buy” calls, according to Bloomberg. The consensus’ 12-month target price is RM7.57.

The consensus forecast of Bursa Malaysia’s net profit is RM257.94 million for FY2024, RM266.19 million in FY2025 and RM275.45 million in FY2026, according to Bloomberg.

“Although ADV is set to rebound strongly this year, we reckon that this has been priced in” with above-mean valuations,” Hong Leong said.

Further, a gap in Bursa’s earnings multiple has widened compared to its regional peers — currently standing at a 6.6% premium against a five-year average discount of 24.5% — the house added.

 For FY2023, Bursa Malaysia’s net profit increased 11.4% to RM252.38 million from RM226.57 million a year earlier, while revenue rose 2.2% to RM616.49 million from RM603.25 million previously.

Shares of Bursa Malaysia, which have risen over 7% year-to-date, were traded unchanged at RM7.46 as of 12.19pm on Friday, giving it a market capitalisation of RM6.03 billion.