Bursa Malaysia - 2Q12 broadly in line

Period  2Q12

Actual vs. Expectations Results came in broadly in line with our expectations. The reported 2Q12 net profit of RM37.9m was approximately 8.6% above our quarterly forecast of RM34.9m. The accumulated six months’ net profit of RM78.7m accounted for 52% of the street’s full year estimate and our forecast of RM151m.

Dividends           Declared an interim single-tier DPS of 13.5 sen (vs. our estimate of 13.0 sen). Ex-date is on 31/07/2012 while the entitlement date is fixed on 02/08/2012.

Key Result Highlights      QoQ, total income and net profit declined 4.1% and 6.9% respectively to RM106.0m and RM37.9m due mainly to the much lower average daily trading value and volume in 2Q12. The average daily trading value and volume were recorded at RM1.5b (-20.6% QoQ) and 1.1b shares (-41.5% QoQ) compared to RM1.9b and 2.0b shares in 1Q12. In addition, its other operating revenue also declined 44% QoQ to RM5.6m from RM10.0m.

YoY, both the total income and net profit grew 4.9% and 6.3% respectively despite a lower average daily trading value (2Q12: RM1.6b). This was due to increases in the stable revenue income streams (see overleaf for details).

On a cumulative basis YoY, the total income declined marginally by 0.3% while net profit grew marginally at 3.3% due mainly to a lower overall operating cost by 6.1% YoY.

Outlook               With our more optimistic market view, we believe that market conditions should improve in the coming quarters. We have recently pegged our 12-month index level at 1,750 and revised up our year-end index target to 1,680 (from 1,650 previously). We believe the equity market average trading value and volume should rise back to RM1.85b and 1.45b respectively in 2H12, which will be 25% and 27% respectively higher than 2Q12.

Change to Forecasts       Maintaining our FY12E-FY13E net earnings estimates of RM150.7m (+3.1% YoY) and RM175.6m (+16.5% YoY).

Rating   Maintain OUTPERFORM

Valuation            Maintaining our target price of RM7.70, which is based on 23.3x FY13 PER and 4.6x FY13 PBV, which are in line with its 3-year average Forward PER and PBV of 23.9x and 4.4x respectively.

Risks      Much slower than expected market activities.

Source: Kenanga