BURSA (1818) : Bursa Malaysia - Decent 3Q14 earnings
Target RM8.82 (Stock Rating: ADD)
Although Bursa’s 9M14 net profit accounted for 76% of our and consensus full-year forecasts, we regard the results as being in line since 4Q revenue is seasonally the weakest. We retain our EPS forecasts. Though we roll forward our target price to end-2015, it is reduced because we lower our target FY16 P/E from 26.5x to 21.5x, on par with the 3-year average given the sliding P/E multiple in the past 2-3 years. However, Bursa remains an Add given (1) its above-market dividend yield of 4-5%, and (2) the positive outlook for the derivative business.
Higher market cap pushing up equity income
3Q14 was not a spectacular quarter for the equity market as market velocity slid from 31% a year ago to 30% in 3Q14. But market capitalisation rose by 10% yoy to RM1.77tr, pushing up the 3Q14 average daily trading value (ADTV) by 9.8% yoy to RM2.2bn in 3Q14. For the same reason, ADTV also advanced by 5.6% yoy to RM2.1bn in 9M14, despite a drop in market velocity from 31% in 9M13 to 30% in 9M14. On the back of higher ADTV, Bursa’s equity income expanded by 8% yoy to RM180.6m in 9M14. In 9M14, equity trading income made up about half (51.4%) of Bursa’s total revenue.
Lower derivative income
The average daily contracts for derivative market advanced by a healthy 12% yoy to 49,320 in 9M14, with the increase mainly emanating from CPO futures. Nonetheless, derivative trading revenue slipped by 4% yoy to RM51.6m, due to lower guarantee and collateral management fees. Overall, derivative trading income accounted for 14.7% of Bursa’s total revenue in 9M14.
Buy for yield and derivative business
Stay invested in Bursa to capitalise on its above-market dividend yield of 4-5% and the positive outlook for its derivative business. We see the lower derivative income in 9M14 as a hiccup resulting from lower guarantee and collateral management fees. We take comfort in the continuous healthy expansion of derivatives trading, which bodes well for Bursa’s earnings from its derivative business.
Source: CIMB Daybreak - 21 October 2014
Target RM8.82 (Stock Rating: ADD)
Although Bursa’s 9M14 net profit accounted for 76% of our and consensus full-year forecasts, we regard the results as being in line since 4Q revenue is seasonally the weakest. We retain our EPS forecasts. Though we roll forward our target price to end-2015, it is reduced because we lower our target FY16 P/E from 26.5x to 21.5x, on par with the 3-year average given the sliding P/E multiple in the past 2-3 years. However, Bursa remains an Add given (1) its above-market dividend yield of 4-5%, and (2) the positive outlook for the derivative business.
Higher market cap pushing up equity income
3Q14 was not a spectacular quarter for the equity market as market velocity slid from 31% a year ago to 30% in 3Q14. But market capitalisation rose by 10% yoy to RM1.77tr, pushing up the 3Q14 average daily trading value (ADTV) by 9.8% yoy to RM2.2bn in 3Q14. For the same reason, ADTV also advanced by 5.6% yoy to RM2.1bn in 9M14, despite a drop in market velocity from 31% in 9M13 to 30% in 9M14. On the back of higher ADTV, Bursa’s equity income expanded by 8% yoy to RM180.6m in 9M14. In 9M14, equity trading income made up about half (51.4%) of Bursa’s total revenue.
Lower derivative income
The average daily contracts for derivative market advanced by a healthy 12% yoy to 49,320 in 9M14, with the increase mainly emanating from CPO futures. Nonetheless, derivative trading revenue slipped by 4% yoy to RM51.6m, due to lower guarantee and collateral management fees. Overall, derivative trading income accounted for 14.7% of Bursa’s total revenue in 9M14.
Buy for yield and derivative business
Stay invested in Bursa to capitalise on its above-market dividend yield of 4-5% and the positive outlook for its derivative business. We see the lower derivative income in 9M14 as a hiccup resulting from lower guarantee and collateral management fees. We take comfort in the continuous healthy expansion of derivatives trading, which bodes well for Bursa’s earnings from its derivative business.
Source: CIMB Daybreak - 21 October 2014
