Bursa Malaysia - Better numbers ahead Buy

- We maintain our BUY recommendation on Bursa Malaysia Bhd (Bursa), but with a higher fair value of RM8.20/share, pegging the stock at an unchanged 30x PE against an upward revised FY12F earnings. 

- For the 6 months to 30 June 2012, Bursa reported a  net profit of RM78.7mil (1HFY11: RM76.2mil, +3% YoY). For 2QFY12, Bursa’s net profit was down 7% to RM37.9mil from RM40.8mil in 1QFY12 after recording a 30% QoQ jump in the previous quarter.

- The results were within expectations, accounting for 52% of consensus, but slightly above our expectations – making up 57% of our forecast numbers.

- Bursa declared a single-tier interim dividend of 13.5 sen/share, payable on 15 August 2012. This makes up ~52% of our revised DPS for FY12F. We continue to assume a payout ratio of  92%-95% for FY12F and FY13F, in line with what it has been paying out for the past 5 years. 

- Following the 2QFY12 results, we have tweaked upwards our FY12F and FY13F earnings by 7% and 6%, respectively. These are premised on:- (1) our end-2012 FBM KLCI target of 1,690; (2) the listing of two large cap IPOs, namely Felda Global Ventures Holdings and Integrated Healthcare; (3) record number of structured warrants being listed this year (FY11: 363; 1H11: 201; 1H12: 267); and (4) higher stable revenue from various fees coupled with a stable cost structure. 

- In 2QFY12, average daily traded value (ADTV) shrank 23% to RM1.5bil from RM2.0bil in 1QFY12. YoY, the decrease was smaller at 10%. Nonetheless, we are not too concerned and are keeping our ADTV growth forecasts of 5% for FY12F and of 5.5% for FY13F as we believe volumes will recover in 2H12. In line with the quieter 2QFY12, market velocity fell to 27% from 34% in 1Q12 and 30% in 2Q11.

- The derivatives market continues to shine. Average daily contracts (ADC) for 2QFY12 was 40,367, the highest ever recorded (QoQ: +30%; YoY: +4%).  This is in line with our assumption of an 18% growth in ADC for FY12F vs. FY11’s 34,474 and management’s target of 50,000 ADC by 2013. Foreign participation in both the FCPO and FKLI also achieved all-time highs of 30% and 53%, respectively, in June 2012.

- Bursa’s operating revenue fell a mere 2% from RM200.3mil in 1HFY11 to RM197.2mil in 1HFY12 despite the 10% drop in securities trading revenue (which made up ~50% of operating revenue). The decline was cushioned by the increase in both derivatives trading revenue (+3%) and stable revenue (+10%). The improved contribution from the latter was due to higher listing, market data and access fees. 

- As expected, Bursa’s operating expenses were relatively stable, down 4% YoY from RM109.5mil in 1HFY11 to RM104.9mil in 1HFY12. The decrease was mainly due to the reduction in staff costs and lower depreciation and

Source: AmeSecurities