RHB Investment Research Reports

Bursa Malaysia - Navigating Muddy Waters

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Publish date: Thu, 16 Jan 2025, 09:38 AM
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An official blog in I3investor to publish research reports provided by RHB Research team.

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  • NEUTRAL, new MYR8.80 TP from MYR9.70, 5% upside with c.4% FY25F yield. We believe Bursa Malaysia could post a 4Q24 net profit of MYR75-85m when it announces results on 27 Jan - which would place the exchange comfortably ahead of its FY24 targets. However, we expect the recent market weakness to persist in 2025, leading to negative earnings growth for the year. As such, we maintain our NEUTRAL stance on the counter.
  • A derivatives-led quarter. Securities average daily value (SADV) traded fell to MYR2.9bn (-24% QoQ, +6% YoY) in 4Q24. We think the weakness stemmed from uncertainties surrounding the US economy and profit-taking, particularly from foreign investors. We also observed some diversion in trade flows towards China, following the country's announcement of expansionary policies to stimulate the economy. On the other hand, the derivatives market enjoyed elevated trades of CPO futures, thanks to the strong rally in the underlying commodity's prices. Derivatives average daily contracts (DADC) traded stood at 107k for the quarter - the highest quarterly level ever achieved for BURSA.
  • 2024 - a year of numerous records. For the year, SADV amounted to MYR3.44bn, up 50% YoY on strong investor confidence and a resilient local economy. Save the exceptionally strong COVID-19 years of 2020 and 2021, the 2024 SADV was the highest on record. Elsewhere, DADC surged 26% YoY to 92k, another record high for BURSA. The exchange also saw 55 new listings in 2024, surpassing the previous high of 40 IPOs in 2006. The new listings accounted for over MYR30bn in total market capitalisation, beating the bourse's target of MYR13bn for the year.
  • Results preview. Given the above items, we think BURSA could post total income of MYR200-210m in 4Q24. Assuming opex for the quarter amounts to MYR100m (c.48-50% CIR) and a 26% effective tax rate (as at 9M24), this translates to a quarterly PAT of MYR75-85m, or up 26-43% YoY (QoQ: -4-+9%). This would bring the FY24 total PAT to MYR316-326m (+25-29% YoY). Unsurprisingly, our implied FY24 PBT of MYR430-440m would come in ahead of management's MYR361-379m targeted range.
  • A cautious outlook. SADV weakness in 4Q24 appears to have carried over into the new year, with foreign investors remaining net sellers in the first two weeks of the year. A "higher-for-longer" narrative on US policy rates also poses downside risk to securities market activity. However, we think the derivatives market should continue to perform well, especially as we expect CPO prices to remain buoyant (at MYR4.4-4.8k/tonne), at least up to 1H25.
  • We cut FY25-26F SADV by 14% and 5%, leading to 9% and 4% decreases in our earnings estimates. As such, our TP (based on an unchanged 24.5x FY25F P/E) - which includes a 6% ESG premium - drops to MYR8.80.

Source: RHB Research - 16 Jan 2025

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