KUALA LUMPUR: AmInvestment Research is retaining its Hold call with a lower fair value on Bursa Malaysia of RM6.05 from RM6.15.
It said on Friday its valuation was based on FY20 price-to-earnings (PE) of 24 times (five-year historical average PE).
“We fine-tune our FY20/21 earnings estimates by -1.4%/-2.4% to RM203mil/RM223mil. We lower our FY20/21 daily average trading value (DATV) assumptions for the securities market to RM2bil/RM2.2bil from RM2.1bil/RM2.3bil while raising our projection for the average daily contacts (ADC) for derivatives, ” it said.
AmInvest Research pointed out Bursa recorded a softer 4Q19 earnings of RM46mil (-3.3%QoQ) despite a marginal improvement in operating revenue. This was largely due to a higher operating cost as marketing and business development expenses rose, coupled with a one-off impairment on computer software of RM3.3mil.
For 12M19, Bursa’s net profit came in at RM186mil (-17.0% YoY). The lower cumulative earnings were largely due to a decline in securities, derivatives trading revenue and higher opex contributed by business development expenses.
Also, 12M19 saw a drop in listing and issuer services fees and BSAS trading revenue.
“Its 12M19 earnings were within expectations, making up 97.3% of our estimate and 97.7% of consensus forecast, ” it said.
AmInvest Research understands that Bursa is looking at three Main Market, 11 Ace Market and five Leap Market IPOs.
With onw company for Ace Market and two for Leap Market already listed in January 2020, the group is now looking at another 16 potential listings with a target of 40 listings this year.
“We believe that the vibrancy of the market still largely depends on the improvement in investor sentiment to lift the DATV for equities higher. This will, to a large extent, lean on further progression in the US-China trade past the first phase of the trade agreement removing the bulk of tariffs imposed.
“As of now, geopolitical tensions still persist, and this is likely to cause the market to remain volatile.
“Also, the current 2019-nCoV outbreak is likely to result in investors staying cautious in the short term, thus impacting securities transactions before the market eventually recovers after the dust has settled.
“Whilst challenges remain for transactions in the securities market in the near term, the volatile market bodes well for higher transactions in derivatives, ” AmInvest Research said.
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