Better profits projected for Bursa on high average daily volumes

Bursa’s FY21 estimated yield is now 121 basis points above the 10-year Malaysian government securities (MGS).

PETALING JAYA: In expectations that equity average daily volumes (ADV) on Bursa Malaysia would remain high over the near term, Maybank Investment Bank (IB) Research has raised its earnings and dividend forecasts on the exchange operator.

The research unit said it has raised its equity ADV assumptions to RM4.5bil (from RM4bil previously) for the financial years ending Dec 31,2021 (FY21) and to RM4.6bil (from RM4.2bil previously) for FY22.

However, the research unit has maintained its derivative growth assumptions of 5% per annum for FY21 and FY22. Its net profit forecast upgrades also lead to higher dividend per share (DPS) estimates, based on unchanged 91% to 92% dividend payout ratio (FY20: 92%).

Bursa’s FY21 estimated yield is now 121 basis points above the 10-year Malaysian government securities (MGS). Maybank IB Research noted that equity and derivative trades remain robust, with monthly equity ADV staying above the RM5bil mark in 2021 year-to-date.

The research unit said equity ADV was at RM5.1bil in January, RM5.3bil in February, RM6bil in March thus far (2020: RM4.3bil).

Domestic retail investors contributed 39% to total trades in 2021 year-to-date, while domestic institutions and foreign investors accounted for 45% and 17% respectively (2020: 37%, 46% and 17% respectively). “Based on our estimates, trading on the top-four market cap glove stocks contributed 12% to total trades in 2021 year-to-date (May till December 2020: 21%).

Over at the derivative market, the volume has stayed robust at 1.62 million contracts in January 2021, and 1.34 million contracts in February (2020: average 1.52 million contracts per month). Meanwhile, in its Sustainability Roadmap 2021 to 2023, Bursa said it is exploring a new environmental, social, and governance (ESG) index (such as a Green Index) to complement the FTSE4Good Bursa Malaysia or F4GBM Index (75 constituents end-2020).

Maybank IB Research pointed out that as equity ADV on Bursa has stayed high in 2021 year-to-date, it has raised its FY21, FY22 and FY23 net profit estimates by 8%, 6% and 4% respectively. Current valuation at 19.4 times FY21 estimated price-earnings ratio (PER) is below peers’ average of 26.9 times.

Bursa’s yield offering is however higher at 4.7%. Maybank IB Research has maintained its “buy” call on Bursa Malaysia’s stock and raised its 12-month target price to RM10.75 on an unchanged 23 times FY21 estimated PER (10-year mean).

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