KUALA LUMPUR (March 13): Bursa Malaysia Bhd’s (KL:BURSA) earnings will take a hit if the exchange is forced to shell out more to help fund the securities regulator’s operations, said BIMB Securities.

Trading volume at Bursa will be dragged if the Securities Commission (SC) raises fees across all regulated activities as planned, the research house said in a note. Some have argued that Bursa should contribute more to funding the SC, given its strong profitability, it noted.

“If this materialises, we and the rest of the street will have to cut our earnings forecasts,” BIMB Securities cautioned. “While the outcome remains uncertain amid ongoing industry pushback, this remains a key issue to monitor.”

The Edge Malaysia weekly reported in the Feb 17-23, 2025 edition of a plan by the SC to restructure its fees, and tack on a levy of up to 1.5% on revenue from regulated activities generated by the companies.

That covers gross revenue “directly or indirectly derived as a result of holding a licence” for activities such as dealing in bonds, brokerage income including platform fee, underwriting fee and other fees and commission, according to a document sighted by The Edge.

Bursa is currently sharing some of the trading revenue with SC. As a company, Bursa produces return-on-equity well above its peers, while maintaining a net cash balance sheet and generating massive amounts of cash that exceeds its borrowings each quarter, according to BIMB Securities.

For now, Bursa is on BIMB Securities’ “buy” call, with both of its earnings and enterprise multiples below its historical mean.

Against global peers, Bursa is a bargain too as its price, as a proportion of earnings and free cash flow, is way below that of its peers in Asia, Europe, and NorthAmerica, while offering above-average dividend yields and return-on-equity, the house said.

Shares of Bursa have fallen more than 15% since the year started, and “this presents an opportunity to accumulate, given its undemanding valuation,” BIMB Securities added.

“Hold” and “sell” ratings outnumber “buy” calls, according to 17 analysts tracked by Bloomberg. The 12-month target price is RM9.29, implying a potential upside of 24%. At its last price of RM7.47, the company had a market capitalisation of RM5.95 billion.

Read also:
SC’s income not enough to cover expenditures 
SC to revamp fee structures, impose levy 
Stockbrokers reviewing Securities Commission’s fee, levy proposals