Investment Highlights

• We maintain our HOLD recommendation with a lower fair value on Bursa Malaysia (Bursa) of RM6.05/share from RM6.15/share. Our valuation is based on FY20 PE of 24.0x (5-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 DATV assumptions for the securities market to RM2.0bil/RM2.2bil from RM2.1bil/RM2.3bil while raising our projection for the average daily contacts (ADC) for derivatives.

• 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. 12M19 earnings were within expectations, making up 97.3% of our estimate and 97.7% of consensus forecast.

• On the securities market, DATV (on an OMT basis) for equities was lower at RM1.79bil in 4Q19 vs. RM1.86bil in 3Q19. For 12M19, the DATV (OMT) for equities slipped to RM1.9bil vs. 12M18’s RM2.4bil, and was in line with our expectation.

• Market velocity for 12M19 fell to 28.0% compared to 32.0% in 12M18.

• The effective clearing fee rate (ECFR) for the securities market in 12M19 was stable at 2.27%. ADV traded by foreign investors declined to RM571mil for 12M19 (12M18: RM647mil).

• In 4Q19, foreign fund flows to equities on a cumulative basis registered an outflow of RM3.2bil, similar to 3Q19’s. The outflow of funds was only slightly lower than 2Q19’s -RM3.3bil. Foreign investors continued to be net sellers of equities in Oct, Nov and Dec 2019. For 2019, foreign fund outflows were circa RM11bil, almost matching that of 2018 (Exhibit 2).

• On derivatives, the ADC dipped by 2.0% YoY in 12M19 to 55,372 contracts driven by lower FKLI trades due to a decline in volatility in the FBM KLCI. Meanwhile, trades for FCPO were stable.

Source: AmInvest Research - 31 Jan 2020