HLIB Research projected Bursa would record quarterly core earnings of RM87mil.
PETALING JAYA: Bursa Malaysia is expected to post sequentially stronger earnings for the third quarter ended Sept 30, 2024 (3Q24), as higher derivatives average daily contracts (ADC) offset lower securities average daily volume (ADV).
During the quarter, the group saw its derivatives ADC rise 14.9% quarter-on-quarter (q-o-q) or 34.1% year-on-year (y-o-y) to 98,400, while securities ADV declined 2.5% q-o-q, but rose 65.8% y-o-y to RM3.5bil.
Based on the 3Q24 derivatives ADC and securities ADV, Hong Leong Investment Bank Research (HLIB Research) projected Bursa would record quarterly core earnings of RM87mil, representing an increase of 8% q-o-q, or 44% y-o-y for the quarter.
The research house said this would form 78% of its full-year forecast and 77% of consensus estimates.
“We expect 4Q24 to witness softer ADV, and typically higher operating expenditure,” it said. Bursa is tentatively scheduled to release its 3Q24 results on Oct 30.
HLIB Research maintained its “hold” call on Bursa, with a lower target price of RM9.75, compared with RM9.96 previously.
The lower target price was due to the research house recalibrating Bursa’s five-year price-earnings (PE) band and rolling forward the valuation horizon.
The revised target price is based on 25 times PE tagged to 2025 estimated earnings per share (EPS).
“Despite the ADV revival this year, we feel it is difficult to justify further share price upside seeing that its PE is already at 1.1 standard deviations above the five-year mean,” HLIB Research said.
“Furthermore, its PE discount to peers has also narrowed to minus 2.6% versus the five-year average of minus 21%. Considering these factors, we feel that Bursa is fairly valued,” the research house added.
HLIB Research noted that Bursa’s ADV for 2024 is on track to chart a post-pandemic high. Year-to-date, ADV had reached RM3.3bil, while HLIB Research had projected full-year ADV of RM3bil.
Meanwhile, regarding the proposed dividend tax in Budget 2025, HLIB Research noted that the rate is digestible as the net yield reduction is minimal.
For instance, its projected dividend yields of 3.77% for 2024 and 3.84% for 2025 for Bursa would be reduced to 3.69% and 3.76%, respectively.
“Furthermore, as it only impacts those with dividend income of more than RM100,000 – implying stock investments of more than RM2mil (assuming 5% yield) – this likely forms a small portion of retail investors,” the research house said.
