Better Days Ahead For Bursa: MIDF

Bursa Malaysia Bhd saw its 1QFY23 earnings decline -17.4% yoy however, MIDF notes that this was within its own and consensus expectations, coming in at 22.8% and 23.9% of respective full-year estimates. The Exchange noted that the decline in earnings was due to normalisation of trading revenues.

Total revenue in 1QFY23 fell -5.3%yoy dragged by securities trading revenue which declined -15.3%yoy. This was due to lower ADV, contracting -17.7%yoy to RM2.14b as trades came in lower from all segments. However, we should note that operating revenues were still higher than pre-pandemic levels. The house believes this is evident in the normalisation of retail trades to the pre-pandemic level. Meanwhile, nontrading revenues increased +5.8%yoy to RM56.6m, moderating the revenue decline. This was due to higher market data, member services & connectivity, and conference & exhibition-related income.

Bursa also highlighted the higher operating expenditure, OPEX grew by only +10.6%yoy to RM80.2m in 1QFY23. This was mainly due to higher staff costs which rose +3.6%yoy to RM40.7m on higher headcount for new business and capacity building.

As for the forecast, MIDF said it makes no changes to its earnings estimate. Moving forward, the house opines the weakness in trading activities continues to be a feature due to volatility in global markets caused by US Fed’s actions and geopolitical issues. This may have led to or exacerbated the normalisation of retail trade. However, it is expected 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, we have seen better performance in the mid and small-cap space with FBM70 index and FBM Small Cap index this year. MIDF maintains a BUY call on the stock with unchanged TP to RM7.30 pegging FY23 EPS to a PER of 24x.

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