Bursa Malaysia - 4Q12 Below But 12MF12 In line

Period    4Q12/12M12

Actual vs.  Expectations  The results came in below expectations. The reported 4Q12 net profit of RM35.7m was approximately 14% below our quarterly forecast of RM41.5m. The accumulated 12 months net profit of RM146.2m was, however, within the street’s full year estimate and our forecast of RM151m.

Dividends   A final (single tier) dividend of 13.5 sen has been declared. This amount is slight above our earlier expectation of 13.0 sen.

Key Result Highlights  QoQ, the total income dipped marginally by 1.7% to RM104.4m. The net profit declined further by 3.6% to RM35.7m due mainly to a higher staff cost (+7.1% QoQ) despite a relatively lower effective tax rate of 25.3% as opposed to 29.1% in 3Q12. The flat total income was in line with the uninspiring equity trading revenue, which dipped 7.6% even though the average FBMKLCI index rose 1.6% from 1,637 in 3Q12 to 1,663 in 4Q12. This was because the average daily trading value and volume were registered at only RM1.4b (-10.4% QoQ) and 1.0b shares (-13.7% QoQ) respectively.

 4Q12 vs. 4Q11:  Both the total income and net profit advanced 9.1% and 13.9% respectively despite a much lower average daily trading volume (-36.5% YoY). This was because the increase in operating revenue came mainly from the non-trading revenues. For instance, listing fees increased by 16% to RM10.2m. The increase was mainly attributable to the higher number of new structured warrant listings. Further, depository revenue has also increased by 41% to RM9.3m due mainly to the listing of a large IPO namely Astro and a merger of two broking houses in 4Q12.

 FY12 vs. FY11:  The total income declined 4.1% due mainly to the weaker equity trading revenue value (-7.6% YoY). However, net profit grew 3.6% due to other revenue streams and a lower depreciation (-12.3% YoY) as certain IT assets had been fully depreciated. The staff cost-to-income ratio of 24.0% and effective tax rate of 27.0% were almost flat (vs. 24.8% and 26.6% in FY11). 

Outlook   Going into 1H13, we believe the market trading activities will probably remain unexciting due to the upcoming 13^th General Election jitters. This is in line with our NEUTRAL market view. However, we expect more active trading activities once this uncertainty is over, probably in 2H13.

Change to Forecasts  Maintaining our FY13E net earnings estimates of RM175.6m (+16% YoY) for now but with the risk of downward revisions.

Rating      Downgrading to MARKET PERFORM from OUTPERFORM due to the lower upside of 5.0%.

Valuation    While we are maintaining our earnings estimates, we have, however, revised our Target Price lower to RM6.95 (from RM7.30) based on 21.0x FY13 PER, the stock’s 4-year average Forward PER. The revision is to reflect the lacklustre trading activities on Bursa of late.

Risks   Much slower than expected market activities.

Source: Kenanga