KUALA LUMPUR (April 28): Analysts are positive on stock exchange operator Bursa Malaysia Bhd’s prospects going forward as they upped their trading velocity assumptions for the year.

As such, analysts are also seen tweaking their earnings forecasts upwards to reflect the strong trading interest.

In fact, Bursa’s net profit for the first quarter ended March 31, 2021 (1QFY21) of RM121.39 million is 36.3% of Bloomberg’s consensus estimates.

“We initially thought that the increase in trading interest last year was an exception rather than a ‘new’ normal and this would normalise in FY21 (financial year ending Dec 31, 2021). However, it appears that interest in trading continues to be strong amongst the retail investors,” said MIDF Research head of research Imran Yassin Yusof in a note today.

“Given our expectations of increased volatility on possible new ‘taper tantrum’ episode, this strong trading interest could continue this year. As such, this should bode well for Bursa’s performance this year,” he added.

Imran has upgraded Bursa to “buy” from “neutral”, with an unchanged target price (TP) of RM8.90.

In light of the strong performance, Imran has increased its FY21/FY22/FY23 earnings forecast by +16.9%/+7.1%/+6.9% respectively.

TA Securities Holdings Bhd has upgraded Bursa to “buy” from “sell”, given the recent decline in share price, which implies a potential upside to more than 12%. The research firm also raised the counter’s TP to RM10.30 from RM9.40.

Noting that Bursa recorded another buoyant quarter, the research house foresees the current low interest rates environment and ongoing stimulus and relief measures to help sustain liquidity in the market.

In a note today, TA Securities raised its FY21/FY22/FY23 net profit forecast to RM341 million/RM313 million/RM297 million from RM226 million/RM236 million/RM246 million respectively.

“While we continue to maintain a view that key assumptions such as trading volatility would normalise compared to the phenomenal year in 2020, we raise our assumption for trading velocity to 50%/42%/38% for FY21/FY22/FY23 from 35%, buoyed by the strong 1Q,” the research firm wrote.

Looking ahead, TA Securities foresees opportunities for a turnaround in net foreign flows in the second half of the year on the back of expectations that corporate earnings and ROEs are to improve as the country weather through the “tail end” of the Covid-19 pandemic amid the vaccine rollout.

Meanwhile, CGS-CIMB Research analyst Winson Ng has also raised Bursa’s net profit for FY21 by 15.8% due to the 18.9% rise in his projected equity income as he increased the assumed FY21 clearing fee rate (over total trading value) from 0.03% to 0.037%, closer to the 0.042% in 1QFY21.

He, however, retained a “hold” call on Bursa, with a TP of RM9.18, as he believes that the strong equity average daily trading value (ADTV) is largely priced in given its high FY22 P/E of 29.3 times.

“In our view, the key drivers of robust equity ADTV since 2Q20 have been the low interest rate regime and the movement control order (MCO), which led to an influx of retail liquidity into the equity market,” said Ng, adding that both of these factors are expected to persist in 2QFY21 and thus, he expects Bursa’s 2QFY21 net profit to be close to, or slightly lower than, the level in 1QFY21.

Based on this, he sees Bursa’s net profit growth will be at 30% to 40% y-o-y in 2QFY21.

At noon break, Bursa’s shares were up one sen or 0.12% at RM8.50, valuing it at RM6.88 billion. The counter rose some 47.3% from RM5.77 over the past year but declined some 19.8% from last year’s high of RM10.60 on Aug 5, 2020.

Read also:
Bursa Malaysia’s shares up on positive 1Q results
Bursa Malaysia 1Q net profit doubles to RM121m on higher operating revenue

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