Despite being sequentially stronger, 1QCY23 average daily volume (ADV) fell below the mark, as trading sentiment did not pick up meaningfully said Kenanga in its assessment of the local bourse. While the near-term may not see much improvement, the research house said it anticipates the medium term to fare better on more stable economic prospects. BURSA also aims to boost its non-trading revenues with the launch of new platforms.
1QCY23 ADV arrived at RM2.14b (+11% QoQ, -18% YoY), which was below the anticipated RM2.50b for the period. The house had expected strong trading activities as confidence is rebounding from a more stable domestic political landscape, better economic performance, and the reopening of China’s borders. However, these were overwhelmed by growing recessionary concerns in developed economies and the collapse of several banks denting sentiment in the financial sector.
Immediate-term prospects could be dim. 2QCY23 trading could continue to be marred by the abovementioned factors. Kenanga said it believed overall sentiment will still be underpinned by recessionary concerns in the US. Meaningful positive catalysts will likely hinge on stronger-than-expected economic readings from improved global trade and more stable currencies, which may only arise in 2HCY23 as China’s reopening has so far only generated a largely disappointing muted response. CY23F ADV to move closer to RM2.21b (+7% YoY) and adjust for 1QCY23’s lower ADV while maintaining 2Q-4QCY23 inputs of RM2.10-RM2.40b. This results in a 4% reduction from the earlier CY23F ADV of RM2.30b.
Post update, Kenanga lowered its FY23F earnings by 2.5% due to the abovementioned lower ADV inputs. The updated pre-tax earnings forecast remains within the group’s FY23 target of RM295mRM326m. Trading activities aside, BURSA’s performance could be supported by higher service fees from a stronger IPO pipeline for the year (up to 39 IPOs targeted from FY22 of 35 new listings). Meanwhile, new initiatives (recently launched carbon credit auction and upcoming debt fundraising platform, Bursa Gold Dinar) may be revenue accretive. With this, we expect its 2QFY23 reported earnings to register between RM53m and RM59m.
The house maintains a MARKET PERFORM and TP of RM6.25.
