Valuations have run ahead; D/G to SELL
Bursa’s 1Q22 results were in-line with 1Q net profit at 29%/27% of house/
street’s FY21E. We make no change to our earnings forecasts, expecting
lower FY22 net profit by 34% YoY as equity ADV normalises towards prepandemic level. Our unchanged MYR6.38 TP is based on 22x PER (10Y
mean). D/G to SELL; catalysts are lacking with growth, policy risks and
politics impacting sentiment and trading activities. Bursa’s current share
price implies MYR2.8b equity ADV for 2022E vs. YTD’s MYR2.6b.
Another quarter of normalisation
Bursa’s 1Q22 net profit of MYR68m (+5% QoQ) represents another quarter
of normalisation as equity ADV sustained at MYR2.68b (+1% QoQ) on 36%
trading velocity (+1ppt QoQ). YoY, the 44% fall in net profit was mainly
due to lower trading revenue from equity as ADV fell 48% on a 34-ppt fall
in trading velocity. At derivative trading, 1Q total contracts rose 7% QoQ
contributed by both FCPO (+6%) and FKLI (+15%). Trading revenue from
equity/derivative made up 50%/15% of 1Q22 operating revenue.
No change to earnings forecasts
Apr 2022 MTD’s equity ADV has been slower at MYR2.3b with foreign/DI/
retail participation at 23%/49%/28%. Retail participation, which had
contributed to high equity ADV during the pandemic, has eased to 27% in
2022 YTD, from a high of 44% in Aug 2020. We retain our MYR2.5b equity
ADV forecast for 2022 on 32% trading velocity (pre-pandemic level) while
for derivatives, we continue to forecast a 2% growth in contracts in 2022.
Our 93% DPR assumption translates into 27sen DPS for FY22E (3.9% DY).
A more challenging environment ahead
Bursa anticipates a more challenging and competitive environment
ahead, amid tightening liquidity and normalisation of trading volumes.
Hence, it “expects to register a moderate performance” as compared to
FY21. Nonetheless, it will strive to deliver the planned initiatives which
include new product and service offerings, as well as the new voluntary
carbon trading platform. Its balance sheet remains strong with a net cash
balance of MYR415m (51sen/Bursa shr) as of end-1Q22.