Bursa Malaysia Bhd saw its FY22 earnings decline -36.2%yoy which MIDF notes that is was below its expectation coming in at 79.3% of its full-year estimate. The variance was due to weaker-than-expected revenues while cost was higher than expected.
Total revenue in FY22 fell -21.4%yoy dragged by securities trading revenue which declined -40.5%yoy. This was due to lower ADV (OMT), contracting – 41.5%yoy to RM2.07b as trades from domestic institutions and a retail segment came lower by -37.5%yoy to RM965m and –58.8%yoy to RM550m respectively. In particular, MIDF said it saw the normalisation of retail trades to pre-pandemic level. This was exacerbated by the volatility in the global equities market induced by US Fed aggressiveness last year.
Other revenue segments moderated the decline. The decline in trading revenue was moderated by growth in other segments. Derivatives trading, Bursa Suq Al-Sila, Market Data and Member Services & Connectivity revenues grew +11.3%yoy, +17.8%yoy, +12.5%yoy and +6.4%yoy respectively. OPEX contained. OPEX grew by only +1.4%yoy to RM292.7m in FY22. Higher depreciation, marketing, IT and service fees were moderated by lower manpower costs and other OPEX. Conservative targets for FY23. The management disclosed its headline KPIs for FY23. Financial targets are PBT of RM295m to RM326m, non-trading revenue growth of 5-7%yoy, while nonfinancial targets are 39 IPOs with RM10b total IPO market cap, the launch of new products such as Bursa Gold Dinar and ESG target to reduce ≥5% of scope 1 & 2 emissions. We believe that these targets are achievable given that it is very conservative, especially on the PBT target given that external factors might be in favour to trading activities this year. However, OPEX growth is expected to be mid-single digits as it will be investing to support these targets.
MIDf is revising its FY23/FY24 earnings downwards by -19.6%/-17.1%to take into account of the normalisation of retail trades and higher OPEX.
The research house opines that the weakness in trading activities in FY22 was due to volatility in global markets caused
by US Fed’s hawkish stance and geopolitical issues. This may have led to or exacerbated the normalisation of retail
trades. However, it expects that the further pivot by the US Fed as it slows the pace and pauses its rate hikes will
improve sentiment and market valuation going forward. This will be a boost to global equities trading activities. In fact,
MIDF said it has seen better performance in the mid and small-cap space with FBM70 index and FBM Small Cap index chalking +5.0% and 8.1% gains year-to-date respectively.
Therefore, the house is maintaining its BUY call on the stock. However, revised the TP to RM7.30 (from RM7.60) due to earnings estimate revision. And also peg FY23 EPS to a higher PER of 24x (from 20x) which is closer to its historical PER.