PETALING JAYA: RHB Research has cut its forecast on Bursa Malaysia Bhd ’s earnings for this year due to lower trading volume expectation.
The research house had also cut its net profit forecast for Bursa FY20 and FY21 by 8% for the same reason.
“We lowered our 2019 net profit forecast by 9% to RM233mil from RM255mil, mainly due to our lower 2019 forecast securities average daily value assumption that was cut by 10% to RM2.35bil,” it said in a report yesterday.
Shares in Bursa has been on a decline since mid-January by 5.3% to RM6.88 at yesterday’s close.
Despite the earnings cut, RHB maintained its “buy” call on Bursa with target price of RM7.50 a share.
However, the target price was lower than its previous target price of RM8.20 a share.
“Our target price is pegged to 26 times 2019 earnings per share,” RHB said.
“We believe global developments such as optimism over the US-China trade talks could result in more active equities trading in the second to fourth quarter compare with the first quarter as investors reposition their portfolios,” it added.
It pointed out that weaker futures traded for the first two months of 2019 was due to weakness in volumes traded for both KLCI futures and CPO futures.
“For the first two months of 2019, derivatives average daily contracts (DADC) traded was 38,947, down 33% against the 4Q last year,” it said. It expected that the 2019 DADC of 56,488 would remained unchanged year-on-year as volumes would pick up in subsequent months. The stock exchange operator’s fourth-quarter net profit to end-December fell 6.17% to RM51.86mil from the previous year’s corresponding quarter. Revenue fell 8.7% to RM128.92mil.
In a recent results briefing by Bursa, the firm expected the initial public offering (IPO) market to improve in 2019 compared with last year, especially for the main market listing.
Since the beginning of the year, there were four IPOs, of which two on the Ace Market and the other two on the LEAP market.
The upcoming sizeable IPO that would be listed on the main market include QSR Brands (M) Holdings Bhd and Leong Hup International Bhd, which were expected to to bring some excitement.