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KUALA LUMPUR: CIMB Equities Research is maintaining its hold call for Bursa Malaysia as the strong first half of 2017 (H12017) results and special dividend had already been priced in at its current rich price-to-earnings valuation.
The research house said on Thursday the stock exchange operator’s FY18F price-to-earnings (P/E) of 23.6 times is more than one standard deviation above its historical five-year average of 19.4 times.
“Furthermore, we envisage a weaker net profit for Bursa in 2H17F as we expect the stock market to register lower trading value then,” it said.
CIMB Research said although Bursa’s 1HFY17 net profit accounted for 53.7% of its full-year forecast and 52.1% of Bloomberg consensus estimates, it deemed the results in line as it expects the stock market to register a lower trading value in 2H17F (versus 1H17).
The key highlight of Bursa’s 2Q17 results was the declaration of a special dividend of 15 sen a share, in addition to an interim net DPS of 20 sen.
“This was not a surprise to us as we had highlighted the potential for special dividends in our report dated May 3, 2017. The special dividend in 2Q17 translates to an additional dividend yield of 1.5% for FY17F,” it said. Factoring in the special dividend, it projects an enticing dividend yield of 5.2% for FY17F.
Bursa’s net profit surged by 16.9% on-year to RM116.2mil in 1H17.
This was underpinned by the 8.2% on-year rise in total revenue, which outpaced the 1.2% on-year increase in operating costs.
The topline growth was primarily from the 23.3% on-year jump in 1H17 equity trading income, which more than offset the 11.7% on-year drop in derivative trading income.
A jump in equity trading income 1H17 equity trading income was lifted by the 31.6% on-year rise in average daily trading value (ADTV) to RM2.5bn.
The increase in 1H17 ADTV emanated from: (1) the 10.7% on-year increase in market capitalisation to RM1.84tr, and (2) the hike in market velocity from 28% in 1H16 in 35% in 1H17.
“We retain our FY17-19F EPS forecasts and target price of RM10.40, which is pegged to an FY18F target P/E of 24 times (two standard deviation above historical five-year average).
“However, we raise our projected net DPS for FY17F from 38 sen to 53 sen to account for the special dividend of 15 sen a share,” it said.
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