Bursa’s 3QCY23 average daily value (ADV) beat expectations as sentiment was lifted by more favourable conditions, local analysts anticipate further expansion in ADVs in 4QCY23 before stabilising in CY24 as global macros are likely to exude less volatility. Greater participation is expected to come from both domestic and foreign fronts.
Adjusting for the higher 3QCY23 ADV, Kenanga has raised its FY23F earnings slightly by 2%. 3QCY23 ADV closed at RM2.13b (+19% QoQ, +31% YoY), above the expected RM2.00b for the quarter. This also marks the first quarterly YoY improvement since 2QCY21. Granted, 3QCY22 ADV of RM1.62b was severely hurt by heightened recessionary fears with the US Fed having progressively raised Fed Rates to 3.00%-3.25% in Sep 2022 from 0.00%-0.25% in Mar 2022. We could also attribute better
sentiment in the market to political stability post-state election results in Aug 2023.
The house anticipates more encouraging participation in the market with foreign inflows expected to lift activities. Although the upcoming Budget 2024 may likely introduce some negative tunes via targeted fuel subsidies and possible reimplementation of certain taxes, clarity on infrastructure projects could bolster selective trading plays. Additionally, it is anticipating flattish interest rates for OPR and US Fed rates throughout CY24 which may dilute interest in money market products and hence result in a reversion back to equity and derivative securities.
Following the incorporation of 3QCY23 ADV, the full-year number has risen to RM2.11b from RM2.08b, previously. Kenanga has left its 4QCY23 ADV unchanged at RM2.40b on the back of stronger trading interest backed by the above. Also helping this time around is the reduction of stamp duty to 0.10% (capped at RM1k per contract) which translates to cheaper retail participation. This could continue to support our CY24 ADV projections of RM2.40b as well.
Post update, the house has slightly tweaked the FY23F earnings by +2% on the above-mentioned factors. Forecast profit before tax is higher than the group’s FY23 target of RM295m-RM326m but this is with the inclusion of a RM27.7m reversal of provision seen in 2QFY23 which excludes from the core profit earnings. With this expectation in mind, Kenanga expects BURSA’s 3QCY23 core earnings to register between RM55m and RM60m with lumpier earnings to fall in 4QCY23.
Maintain MARKET PERFORM and TP of RM6.25. TP is based on an unchanged 20.0x FY24F PER, in line with its global financial exchange peers’ average, and also with pre-pandemic valuations. Risk- reward ratios appear fair with the lack of strong medium-term catalysts to deliver earnings surprises cushioned by its solid ROE and stable dividend prospects.
