Analysts mixed on Bursa Malaysia’s outlook despite record-breaking FY20

TheEdge Wed, Feb 03, 2021 10:57am - 3 years View Original


KUALA LUMPUR (Feb 3): Analysts are mixed on Bursa Malaysia Bhd’s outlook even after the group posted its best-ever performance for the financial year ended Dec 31, 2020 (FY20).

CGS-CIMB analyst Winson Ng said in a note today that Bursa Malaysia’s FY20 net profit was above expectations, accounting for 104% of his and 105% of the Bloomberg consensus estimates due to better margins for equity income.

“We were positively surprised by the eight sen special dividend per share (DPS) for 4QFY20 (the fourth quarter ended Dec 31, 2020), which represents an additional dividend yield of 0.9%. All in, its FY20 DPS (dividend per share) stood at 51 sen (a 109.2% payout ratio), higher than our forecast of 41 sen (based on a 91% payout ratio). The FY20 DPS translates into an attractive dividend yield of 5.4%,” he said.

Despite the positive takes, he projected a 14.5% drop in Bursa's FY21 net profit as he expects the equity average daily trading value (ADV) to decline from RM4.2 billion in FY20 to RM4 billion in FY21.

He maintained his "hold" call on the stock as he believes Bursa's strong net profit for FY20 to FY21 and the special dividend had been priced in.

Concurring with Ng, MIDF Research analyst Imran Yassin Md Yusof believes the generous dividend had been priced in, thus he maintained his "neutral" call on the stock with an unchanged target price (TP) of RM8.90.

Although Bursa’s FY20 earnings exceeded his estimate, he expects its earnings to somewhat normalise in FY21. Hence, he maintained his FY21 and FY22 earnings forecasts.

Meanwhile, Affin Hwang Capital analyst Tan Ei Leen said Bursa’s 4QFY20 net profit of RM104.9 million (up 130% year-on-year; down 14% quarter-on-quarter) and FY20 net profit of RM377.7 million (up 103.2% year-on-year) were above her expectations by 13% but in line with street estimates.

“We note that retailers were net buyers in 2020 at RM14.3 billion versus RM2.6 billion in the prior year. In our view, this could be the new norm going forward as retail participation could stay robust due to the entrance of new younger investors, booming online trade and ample liquidity given prevailing low interest rates,” she said.

She raised her earnings forecasts for Bursa by 28% to 36% to RM327.1 million and RM321.3 million for FY21 and FY22 respectively.

She also upgraded Bursa to "buy" from "hold" based on a revised TP of RM10.90, which presents an upside potential of 17%.

Kenanga Research analyst Ahmad Ramzani Ramli also said in a note today he had raised his FY21 earnings forecast for Bursa by 33% to RM351 million as he also increased his FY21 ADV forecast to RM4.4 billion (from RM3 billion).

“Although we expect trading activities in FY21 to taper, the trading level nevertheless could remain relatively robust,” he said.

With the revision, he raised his TP for Bursa to RM9.65 (from RM9) as he applied its five-year mean of price-earnings ratio (PER) of 22.1 times to forecast FY21 earnings per share (EPS) of 43.6 sen. He reiterated his "market perform" call on the stock.

On the other hand, while maintaining his earnings forecasts, Hong Leong Investment Bank (HLIB) analyst Jeremy Goh said should ADV be sustained at current levels (RM 5.04 billlion in January versus his FY21 assumption of RM3.36 billion), there would be upside to his estimates.

“2021 is off to a good start for Bursa Malaysia. We believe the market’s recovery path will be a volatile one, given opposing news flows between vaccines and a still elevated Covid-19 count.

“We believe 1H21 (the first half of 2021) will very much be a ‘trading market’ as investors actively rotate back and forth between recovery plays and gloves, auguring well for ADV,” he said while maintaining "buy" on Bursa with a TP of RM11.46.

At the time of writing today, Bursa had risen six sen or 0.64% to RM9.41, valuing the company at RM7.56 billion.

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