Positive outlook: A pedestrian walks past the Bursa Malaysia building in Kuala Lumpur. The local bourse has reported solid yearly growth in its 3Q results.
PETALING JAYA: Bursa Malaysia’s third-quarter results for financial year 2023 (3Q23) have met the expectations of most brokerage houses, which project further growth in the average daily trading volume (ADTV) for equities in 2024.
CGS-CIMB Research said its positive take on the local bourse’s results was based on the post-election recovery in ADTV, which rose by 31.2% year-on-year (y-o-y) and 19.4% quarter-on-quarter to RM2.1bil.
“We attribute this to the improved market sentiment following the state elections on Aug 12 and the launch of Ekonomi Madani by the unity government,” it noted.
The higher ADTV for equities helped Bursa Malaysia to record solid growth of 20.6% y-o-y in net profit in 3Q23.
“This was despite the 8% y-o-y drop in Bursa Malaysia’s derivatives income, arising from the 5.4% y-o-y dip in the average daily contracts in the derivatives market in the first nine monthsof this year,” CGS-CIMB Research said in a note to clients yesterday.
The research house has projected a robust y-o-y net profit growth in 4Q23 for Bursa Malaysia, mainly due to the low base in 4Q22.
“We project net profit to rise 44.4% y-o-y to RM70.7mil in 4Q23 based on our expectation of RM2.1bil-RM2.2bil forecast for equity ADTV in 4Q23,” it added.
CGS-CIMB Research maintained a “hold” call on the stock with a higher target price (TP) of RM6.90 a share from RM6.57 previously.
RHB Research, meanwhile, describes Bursa Malaysia’s 3Q23 results as “a decent quarter”, while maintaining a “buy” on the stock with a new TP of RM7.60 per share.
It noted: “October’s securities average daily volume of RM2.24bil, down 7% month-on-month could indicate a slowdown in trading momentum, which we suspect is due to weakened investor sentiment on Asian equities.”
However, the research house expects trading activity to rebound moving into 2024, in line with its view on improving growth in Asian economies.
Bursa Malaysia has stepped up efforts to encourage listings on the LEAP Market, including publishing a new framework for transfers from the LEAP to the ACE Market.
The group is also exploring new products to be introduced via the data business and Bursa Carbon Exchange.
However, RHB Research has cut Bursa Malaysia’s FY23 forecast core profit by 2% as “we factor in a softer initial public offering (IPO) assumption of 31 from 37”.
Hong Leong Investment Bank (HLIB) Research in its latest report said: “Looking ahead, we are hopeful for the ADTV recovery seen in the second half of the year (2H23) to continue into 2024 given the diminishing political risk premium locally and peaking of the US Federal Reserve’s rate upcycle (with a possible pivot in 2H24).”
The research house also tweaked Bursa Malaysia’s FY23-FY25 earnings higher by 1.7%.
“We note that our FY23 pre-tax profit forecast of RM301mil sits at the lower end of Bursa’s financial performance indicators to hit RM295mil to RM326mil.
“Its other financial indicators to achieve 5% to 7% non-trading revenue growth also appears on track with the number for the nine months of 2023 at plus 5% (though at the lower side),” it added.
HLIB Research maintained a “hold” call on the stock with a slightly higher TP of RM7.03 a share from RM6.91 previously.
It said: “Overall, we opine that the risk to reward profile of Bursa Malaysia is relatively balanced.”
For Kenanga Research, Bursa Malaysia’s core net profit of RM165.2mil for the first nine months of the year met expectations, which made up 74% of its full-year forecast and 70% of consensus full-year estimates.
Bursa Malaysia has maintained its guidance for a pre tax profit of RM295mil-RM326mil versus Kenanga Research’s forecast of RM331.1mil and non-trading revenue growth of 5%-7%.
It maintained a “market perform” call on the stock with a TP of RM6.25 per share.
