• Keep NEUTRAL and MYR7.90 TP, 6% upside. Bursa Malaysia is slated to announce its 1Q24 results on 30 Apr. While we have no formal 1Q24 forecasts, we think the group could likely post double-digit net profit growth YoY and QoQ, given solid operating data for the securities and derivatives markets. However, the longer term trading outlook remains uncertain, especially with ongoing geopolitical conflicts. As such, we maintain our NEUTRAL call on the counter.

• A strong start to the year. Securities average daily value (SADV) traded reached MYR3.18bn, up 40% YoY (QoQ: +17%). We believe this reflects renewed optimism in the domestic equities market from local and foreign investors after two relatively soft years in 2022 and 2023. The energy, industrials and real estate sectors attracted particularly strong investor interest, likely due to the rush of positive news flow on domestic development initiatives. The derivatives market also performed decently, with average daily contracts (DADC) traded reaching 84k units, or up 22% YoY (QoQ: +18%) in 1Q24 thanks to better trades of the KLCI and crude palm oil (CPO) futures. All in, BURSA should post double-digit revenue growth on a YoY and QoQ basis.

• Sticking to opex guidance. From our conversation with management, we learnt that opex growth will likely be in line with the 10-15% YoY guidance provided. 2024 opex initiatives include continued investments in IT and systems upgrades, launching of new platforms and possible inorganic acquisitions for the data business. Taken together with our revenue estimates, BURSA could post 1Q24 net profit of MYR65-75m, which would imply double digit increases YoY and QoQ. These net profit estimates, if true, would meet or slightly beat our and Street full-year projections.

• Geopolitical tensions – a double-edged sword? Ongoing tensions in the Middle East pose significant downside risk to trading activity in the medium to long term, as investors could turn risk off amid the uncertainties. However, BURSA could benefit from near-term equity market volatility. On the derivatives front, CPO price volatility is also positive for CPO futures trades, which will likely offset any potential weakness from the KLCI futures. However, derivatives trading only forms c.15% of BURSA’s operating revenue, whereas securities trading forms >40%.

• No changes to forecasts and TP. For now, we maintain our 2024 SADV/DADC forecasts of MYR2.7bn/74k units, pending further clarity on market reactions – Apr 2024 SADV of MYR2.97bn (as at 19 Apr) is a MoM drop, but still higher than the 2023 average. Our TP is maintained at MYR7.90, and is based on a 22.5x P/E target (in line with mean) with a 6% ESG premium baked in.

Source: RHB Research - 24 Apr 2024