Kenanga noted that Bursa’s 4QCY23 average daily value (ADV) came lower than expected, likely subdued by softer appetite from Budget 2024 developments. The house said while it anticipates a more vibrant trading environment in CY24 with the support of foreign participation, the Exchange could be overpriced at current levels with more attractive dividend yielders elsewhere. Adjusting for the lower 4QCY23 ADV, we adjust our FY23F/FY24F earnings by -2%/-1%.
Although readings reflect a modest recovery from 4QCY22’s lower base, it still missed our expected RM2.4b for 4QCY23. Although the period’s trading conditions were likely supported by resolved political uncertainties in addition to lower stamp duties, overall participation may have been muted by mixed reactions towards Budget 2024 as well as the persistent weakness in domestic currency. On a full-year basis, CY23’s ADV came in at RM2.06b, a slight decline from CY22’s RM2.07b.
Despite the disappointment in 4QCY23’s ADV, the house opines that the anticipated tailwinds would be more pronounced in CY24. Our in-house estimates point for USD/MYR to close at 4.254 (CY23: 4.594) on the back of a GDP target of 4.9% (CY23: 3.8%). Kenanga said it had also observed that foreign inflows are rising, possibly spurred by lower expectations on US Fed rates throughout CY24 which may divert interest in money market products back towards equities and derivative securities. Attributed by the abovementioned, the house keeps its earlier expectations for CY24 ADV to come in at RM2.4b.
Post update, the FY23F/FY24F earnings are adjusted by – 2%/-1%. The forecast profit before tax of RM326.5m is closely within the group’s FY23 target of RM295m-RM326m but with the inclusion of a RM27.7m reversal of provisions. Against an 9MFY23 core earnings of RM165.2m, 4QFY23 earnings could land between RM54m-RM59m.
In this aspect Kenanga Downgrade Bursa UNDERPERFORM (from MARKET PERFORM) on an unchanged TP of RM6.25. While BURSA could see an earnings uplift from a better trading landscape in FY24 backing its solid ROE of c.30%, its risk-to-reward could be unfavourably skewed following its recent price rally. In addition, its expected dividend yield of c.4% may appear unattractive for yield seekers as compared to the 5%- 6% offered by other financial services stocks.
